By Maayan Lubell
KAFR QASSEM, Israel (Reuters) - Israel is poised to pass one of the most divisive laws in its 66-year history, a bill that would declare it the homeland of the Jewish people only -- and further alienate its Arab minority.
Political infighting over the measure is already threatening to tear apart Prime Minister Benjamin Netanyahu's governing coalition.
The legislation, which is seen as compromising equality by differentiating between Jewish and non-Jewish citizens in enshrining some symbolic rights to the Jewish people, could also have long-term practical ramifications for Israeli democracy and jurisprudence.
Netanyahu, along with other right-wing politicians pushing the law, say it is essential to protecting Israel's identity against those questioning its right to exist.
Some commentators say Netanyahu is going ahead now to court a key constituency of right-wing voters he has been losing to far-right parties in his already shaky coalition, with an eye to a possible early election next year should cracks within the government widen.
Centrists in his government argue such legislation is unnecessary, noting the 1948 Declaration of Independence already proclaimed a Jewish state. They accuse him of pandering to hardliners in his Likud party.
"There are many who are challenging Israel's character as the national state of the Jewish people," Netanyahu said on Sunday at a cabinet meeting. "The Palestinians refuse to recognize this and there is also opposition from within."
Palestinians say accepting Netanyahu's call could deny Palestinian refugees of past wars any right of return.
"The discussion on the nation-state (bill) puts obstacles in the way of peace," Palestinian President Mahmoud Abbas said on Tuesday. "It has met fierce opposition inside the Israeli government, Knesset and among the Israeli people."
The bill was approved by Netanyahu's cabinet on Sunday, but political bickering has pushed back by a week, to next Wednesday, a preliminary ratification vote in parliament.
His draft of the bill -- two other versions are being considered and no final wording has been agreed -- pledges to "uphold the individual rights of all of Israel's citizens".
But it also says only the Jewish people have "national rights" -- the right to self-determination in Israel and to a flag, an anthem and free immigration. One draft proposed by a Likud legislator would remove Arabic as an official state language.
"With this law, the state will be less democratic and more racist," said Arab legislator Jamal Zahalka.
Israeli Arabs make up 20 percent of the population of 8.2 million and have long complained of being treated a second-class citizens. Law professor Mordechai Kremnitzer of The Israel Democracy Institute said the bill could open the courtroom door to discrimination.
"Judges could learn from this bill that the Jewish foundation overrides the democratic foundation and draw inspiration from it to hurt equal rights all citizens are entitled to, including the minorities," Kremnitzer said.
In the Arab town of Kafr Qassem, whose Arabic- and Hebrew-signed shops and garages are frequented by Israeli Jews, residents, some of whom saw themselves as Arab-Israeli or as Palestinian citizens of Israel, united against the bill.
"This is our country, our land," said Rasha, a 27-year-old teacher and mother of two at the local market. "Israel is a democracy for Jews only, not for Arabs."
Sitting outside a mosque, as the call for prayer sounded over loudspeakers, Ibrahim Issa, 68, said: "Israel is a strong state, what does it need all this for? Who are they afraid of? The Israeli Arabs?"
The controversy comes at a time of high tensions in Israel, the occupied West Bank and Jerusalem, where a dispute over access to a religious site sacred to Jews and Muslims has ignited Palestinian streets protests and lethal attacks on Jews.
Violence has risen in Jerusalem since June, when Hamas militants abducted and killed three Israeli youths in the West Bank, triggering the murder by Jews of a Palestinian teenager.
Lawmaker Ayelet Shaked of the far-right Jewish Home party said the proposed law would not hurt minorities' rights. It is needed, she said, to ensure rulings of the Supreme Court -- often criticized by the right-wing as being left-leaning -- are balanced.
Shaked, who authored one of the drafts, said that once Israel's status as a Jewish nation-state was anchored in law, the court would be able to take into account Jewish values and national considerations in passing judgment.
"When the Supreme Court rules on whether a law is constitutional or not today, it only has the democratic leg to stand on," she said. "It does not have a Jewish foundation in its legal toolbox."
Rabbi Michael Melchior, a former cabinet minister from the Labour Party, said the law would distort both the Jewish and democratic nature of Israel. "It's one of the worst things ever done in Israel," he said.
(The story was filed to replaces "granting" with "ensrhining" in paragraph 3, capitalizes Jewish Home in paragraph 21)
(Editing by Jeffrey Heller and Giles Elgood)