There are about 7 million Jews in Israel and about 2 million Arabs. (With like less than a million "others"? Something like that.) Palestine's population has been declining (for some... mysterious reason...) but there are still about 5 million Palestinians.

It's simply a question of the numbers: you can have a theocratic Jewish state of Israel or you can have a representative democracy that gives equal Rights to the Palestinians, but not both. Likud is a party of theocrats and they've all decided long ago which is more important to them.