You did read that correctly, as it is laid out here. This effectively establishes a State sponsored religion, which is NOT a staple of a Western nation. More proof that Israel is not by any stretch of the imagination that which they claim to be: a Western nation, and the so-called, "shining beacon of democracy in the Middle East."
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France, U.S. target Islamic State with two strikes in Iraq (Reuters)
from the article: Cabinet approves loyalty oath, but only for non-Jewish new citizens