The most widely mentioned text in Israel over the last few weeks has been the famous quotation by Pastor Martin Niemöller from 1946, which begins: "First they came for the Communists".

Cited by journalists, politicians and academics, or by commenting readers on websites (known in Hebrew as "the talkbackists"), the quotation serves to communicate one idea: the increasing persecution of Palestinian citizens has led to verbal threats against Jewish radical left activists, and is now directed at proposed laws against Zionist-left activists, university professors, journalists, artists and others. The warning from the quotation is clear: "Then they came for me, and by that time there was no one left to speak up for me."

Naturally, a shrill self-righteous choir castigates those who seem to compare Israel to the Germany of 1933-1945. But actually nobody does. The critics merely imply that the present crisis is showing something disturbingly reminiscent of, say, Germany in 1927. Democratic institutions are still functioning, there is still a chance of salvaging something of value, but bad winds are blowing.

The use of Niemöller's emotive words reflects the increasingly bitter national debate around loyalty and patriotism. The populist language of bigoted media consumers ("how come they let this Commie/Arab/traitor speak on radio/television/university") is now pervading official legislative bills, pending parliamentary approval and with a reasonable chance of turning into law.

The influential foreign minister, Avigdor Lieberman, whose 15 Knesset members cement the coalition government, is in the process of upgrading his successful election slogan, "no citizenship without loyalty". He demands that the Kadima "centre" party acquiesce to his "loyalty bill", as a precondition for its admission into the coalition government. The bill would coerce all citizens to declare allegiance to the state of Israel as a "Jewish and democratic" state.

Many rightwing Israelis see the "patriotism oath" not only as a potential weapon against the Palestinian citizens, but also as an instrument to settle the scores with those pesky lefties. They echo the new-ish and vociferous movement, Im Tirtzu ("if you will it"), which is espousing the persecution of dissenting academics in the universities, where "anti-Zionist tendencies thrive and the Zionists are being silenced".

The movement directs most of its venom at university lecturers who support the academic, or economic, boycott of Israeli academic institutes or of Israeli products in general. They propose a new bill that would enable the prosecution of anyone who advocates the boycott, and allow those who feel aggravated by his/her behaviour to sue for up to 30,000 ILS ( £5,000).

This neo-McCarthyism extends itself to artists. A group of mayors last year vowed to stop singers and musicians who dodged military service on medical or other grounds from performing in their cities. Different celebrity figures, mainly models and athletes, are being named and shamed on similar counts. In a discussion in the Knesset's economy committee on Monday, MKs from the right called for a ban on government funding of non-patriotic cinema products. MK Carmel Shama (Likud) referred to successful director Scandar Copti – who co-directed the internationally acclaimed and Academy award nominated film, Ajami – as a terrorist. "I want any director who wants to make a film in Israel to sign a statement stating he is not against Israel," Shama said.

Several racist bills are awaiting a vote – among them a law to "change all signposts of villages and towns into Hebrew names" (hence denying their Arab names), and another specifying a year in prison for anybody who voices objection to Israel's nature as a Jewish or democratic state.

This spirit of xenophobia, and the hunt for traitors and backstabbers, naturally increases the already alarming levels of racism in Israel. The demand for proof of loyalty is no longer confined to the Palestinian citizens, but directed at the Jewish ones, too. This new racism is widening its scope. Palestinians, as well as anything Arab or Muslim, are still targets, but the shockwaves have now spread towards Sudanese refugees, who crossed the border from Egypt and are portrayed by much of the media as "criminal elements".

Other non-Jews, such as working immigrants suffer too. Liberal Israelis often enjoy the idea that the existence of working immigrants in Israel epitomises the country's "multicultural" nature without the price tag of sharing the land with the Palestinians. The working immigrants from Africa, China, the Balkans and South America were allowed in during the early 1990s to relieve Israel of its dependence on Palestinian labour. This, in turn, enables policies of permanent curfews and closures over the West Bank and Gaza. However, the current atmosphere marks anybody who is not Jewish as a prospective enemy.

This xenophobia is closely related to Israel's sense of siege. The international outrage invoked by the multiple attacks on Lebanon and later on Gaza, and the global shock over the flotilla fiasco, left Israelis feeling more isolated and misunderstood than ever. The various boycott movements are beginning to sting.

The reaction in Israel is painfully predictable: Europe is full of Nazis, antisemites, and antisemitic Arabs; the Turks are radical Shia, partners of Iran and friends of all things evil; Barak Obama is a dangerous communist and a black Arab, and so on.

British prime minister David Cameron has volunteered himself unwittingly for the role of the latest baddy in Israel. Surely only a lack of experience could have led him to the conclusion that a place like Gaza – which is surrounded by a wall with watchtowers in it, encircled by tanks, and out of which no one is allowed to exit and very few are allowed to enter – could be described as a prison camp. Ambassador Ron "pressure" Prosor was sent to tell him off.

This picture of panic and racism should not obfuscate another voice now emerging within Israeli discourse as a growing undercurrent; one that is not longer confined to Palestinians and "radical lefty" circles, and is gradually penetrating the hearts and minds of average left-leaning Jewish-Israelis. It is the voice of middle-class Israeli liberals, mostly Zionists, who feel that the hour is very dark indeed.

The smear campaign against the radical left and Palestinian citizens has created huge waves, threatening to wash away the honourable professors of the Hebrew university, and the level-headed law-abiding senior citizens of the New Israel Fund and similar mainstream liberal organisations. In the process, quite a few of them are now suggesting that maybe a boycott, which they originally tended to object to, is the only way to make Israel change direction.

This gradual transformation has failed to embrace centrist liberals and other members of the Zionist centre-left, the lackeys of the rightwing witchhunters. Mati David, a Labour Party activist, published in the liberal Haa'retz newspaper an article risibly entitled "I Accuse!" (after Emile Zola's famous "J'accuse!"). David attacked the Israeli universities for nurturing anti-Zionist activities and tolerating "incitement against Israel and the Israeli Defence Army" in defiance of "obligatory normative patriotism", and called to stop public funding of those who "champion the so-called rights of our enemies".

Popular professor of political science Shlomo Aveneri argued in Haaretz that there is nothing wrong with demanding such loyalty, and that other states in the world, the UK among them, compel new citizens to swear allegiance to the country and its "constitutional principles". However, he suggested a milder wording which includes acceptance of the "legitimacy of the state of Israel", a wording which in fact implies the state's nature as "a Jewish state" without making it explicit.

These are mere examples, but level-headed Israelis can no longer pretend to be studying the horizon when Palestinian citizens and their parliamentary representatives are being smeared and bullied by the state and its agents, or when members of the non-Zionist fringes of the Israeli left are attacked by police in Bil'in, demonstrating alongside Palestinians. The very right to have an opinion and a voice is now under grave threat.