Israel can (debatably) become democratic if she relinquishes sovereignty over the West Bank and Gaza. Until she does this, however, she is clearly not a democracy. That is, unless she prefers to give the franchise to non-Jews residing in the West Bank and Gaza.
Law expanding definition of terrorist activity passes first Knesset reading (Haaretz)
from the article: Keeping Israel Jewish and pure - and democractic if there's time