The world has moved beyond ethnic states. The EU idea is based on a non-ethnic state, and the US is of course a prime example. In a democracy, a state is the state of all its citizens, and they decide by majority vote how the state should act (with constitutional protection for minorities). Netanyahu is presenting himself as a retard when he demands recognition as an ethnic state. The peace with Egypt and Jordan had no such a requirement. Netanyahu's stated goal is to assure the legitimacy of Israel in the eyes of the Palestinians. But he doesn't care that this will also make the presence of Arabs in Israel illegitimate. This is a hopeless demand which will only provide an excuse for non-action. Fortunately, Netanyahu will not act anyhow, so it is a non-issue.
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from the article: Abbas predicts 'very difficult' time for Palestinians after UN bid