SAKHNIN, Israel (Reuters) - Salwa Abu Jaber believes her story shows Israel discriminating against its Arab citizens, 60 years after the state was established as a haven for Jews.
The 32-year-old mother of four from northern Israel said her five-year-old daughter has never seen her father, who lives in the Israeli-occupied West Bank. Separated from the man for five years, she says she has been forced to divorce him.
Thousands of families have been similarly split by a 2003 ban on Palestinians in the West Bank from reuniting with their families inside Israel, imposed citing security reasons after the Palestinian uprising or intifada began in 2000.
"In practical terms, Israel forced the divorce on us," Abu Jaber said. "We could not continue to live like this any longer. If this is not racism, then what is it?"
This week, as Israel celebrates the anniversary of its foundation, its supreme court has said it found merit in the position of numerous petitions filed by rights groups against the law that keeps the families apart.
But Israeli Arabs -- those Palestinians who remained after hundreds of thousands fled or were expelled from their homes when Israel was created -- say institutionalized racism and illegal killings of Arabs have increased since the intifada started.
After 1948, about 120,000 stayed and were granted Israeli citizenship. Now about one in five Israelis is Arab, and many prefer to be called Palestinians like their kin outside Israel.
Israel denies it discriminates and touts its credentials as a multi-cultural democracy, arguing all citizens have the vote and are equal under the law. Arabic is an official language, alongside Hebrew.
Arabs say they also struggle to get jobs, housing and land.
"Arab citizens ... are related to more as enemies than as citizens with equal rights," the Association for Civil Rights in Israel (ACRI) said in its annual report.
The group said "racist incidents" against Arab citizens rose 26 percent in 2006. It did not have more recent figures. Poverty rates are four times higher among Israeli Arabs in comparison to Israeli Jews, according to Haifa-based advocacy group Mossawa.
Twelve Arab lawmakers including a cabinet member hold seats in Israel's 120-member parliament, but less than 8 percent of the country's civil service workforce is made up of Israeli Palestinians, according to a recent civil service report.
The Israeli government acknowledges the gap between the Israeli Jews and Arabs and says it is taking affirmative action to boost the number of Arab civil servants to 10 percent by 2012, particularly in high-ranking posts.
"Israeli Arabs enjoy more freedom, more civil rights that any of their compatriots across the borders," Prime Minister Ehud Olmert's spokesman, Mark Regev, said.
But some rights groups, including ACRI, say Israel has also been using the law to cement the state's Jewish character.
Such draft bills, approved by parliament in 2007, include banning Arabs from buying land controlled by the Jewish National Fund, a quasi-governmental group that was founded before the state of Israel to buy and develop land in Palestine and later oversaw land distribution in the Jewish state.
The JNF also controls land owned by Palestinians before they fled or were driven from their homes when Israel was founded.
Another bill makes eligibility for national insurance benefits dependent on completing military service. Few Arabs serve in the army: unlike for Jews, service is not compulsory.
"The Palestinians inside Israel are being discriminated against in all spheres except for one: the right to vote," Mohammad Barakeh, a member of Israeli parliament, said.
Olmert's spokesman Regev said the bills did not reflect racist attitudes against Arabs, rather "legitimate differences of opinions."
About 1.5 million Arabs reside in Israel with 5.5 million Jews, but 3.8 million Palestinians live in the West Bank, Gaza and East Jerusalem.
U.S. President George W. Bush is hoping for an agreement this year to create a Palestinian state in the West Bank and Gaza Strip alongside Israel.
To Israelis, the government justifies holding talks about creating a Palestinian state by saying the alternative is a single state where Arabs would soon outnumber Jews.
A recent poll by Israel's parliamentary TV station showed 76 percent of Jewish Israelis give some degree of support to transferring Palestinians living inside Israel to a future state -- an option most Arab citizens strongly reject.
"The Jews are the ones who immigrated to our homeland and took our land. We did not immigrate to their land so we cannot leave," said Jamal Zahalka, an Arab lawmaker.
The outbreak of the latest Palestinian intifada marked a turning-point in the way Israel treats its Arab citizens, many say, especially after 13 unarmed Israeli Arabs were killed in October 2000 when police used live ammunition to disperse protests in support of Palestinians in the occupied territories.
Rights groups say a January Israeli court decision not to indict the alleged killers due to "insufficient evidence" was tantamount to giving police a license to kill Arabs.
Two rights groups documented the killing of 41 Arabs by Israeli police or in "racist attacks" by Jews and security guards since 2000. Of those, only one suspected killer has been indicted, said Jafar Farah, director of advocacy group Mossawa.
"The message of (this court's) decision is the following: Israel is allowed to kill Arabs and to make mass arrests," said Abeer Baker, a lawyer with advocacy group Adala in Israel, which represented the families of those killed in the 2000 protests.
The court case rekindled painful memories for the families of those killed.
"They are re-opening my wounds," said Raoofa Lawabneh in Sakhnin in northern Israel as she held a poster of her son, Iyad, who was among those killed. "I wish to see his killer in jail before I die," said the 68-year-old mother of eight.
Many Israeli Arabs say they have lost faith in Israeli justice, arguing police were more restrained while dispersing gatherings by Israeli Jews.
"How come in a country that claims democracy, policemen shoot and kill citizens but no charge sheet is made?" asked Mossawa's Farah. "When it comes to Arab citizens, the law-abiding state does not exist."
(Editing by Samia Nakhoul and Sara Ledwith)
Additional reporting by Ari Rabinovitch in Jerusalem