Nazareth – At 26 metres, Nazareth’s artificial Christmas tree is the tallest in the Middle East, or so city officials boast. Its glinting red, silver and golden baubles have brought a temporary, but much-needed cheer to the city of Jesus’ childhood.

Despite the festive mood, friends and neighbours in what is Israel’s largest Palestinian city struggle to sound hopeful about the future. Even the inflatable Father Christmases hanging from shop awnings look forlorn.

Tourism has crashed since Israel’s attack on Gaza nearly 18 months ago. The unrest seething close by in the occupied West Bank brings unrelenting reports of Palestinian casualties.

And in Syria, a stone’s throw from the Galilee, the crumbling regional order resounds like an ominous portent.

Equally unsettling are signs that Israeli society’s hostility towards its Palestinian minority is turning ever uglier. Chants of “Deaths to the Arabs!” have moved from the football stands to the high street.

My Nazareth-born wife no longer dares take along a knife to peel fruit on outings with our two young daughters, fearful that in the new mood of vigilantism she might be shot as a so-called “lone-wolf” attacker.

In Jewish areas, friends and relatives admit to growing more anxious about speaking Arabic in public or on their phones.

Nazareth became a place of sanctuary for many refugees in 1948 [Getty Images]

Historian Ilan Pappe calls the 1.6 million Palestinians with Israeli citizenship the “forgotten Palestinians”. During the Nakba, the mass dispossession of Palestinians in 1948, they managed to avoid being expelled from the new state. Today, they are one in five of Israel’s population.

Christians and Muslims have lived in shared communities in harmony for centuries. The kind of sectarian conflict Netanyahu is cultivating will benefit Israel, and damage us. Khalil Haddad, tour guide

It is their strange status, as a “trapped minority” in the words of one Israeli sociologist, that first drew me to Nazareth as a journalist more than a decade ago, at the start of the second Intifada.

Over the years, I have come to appreciate the difficulties Palestinian citizens of Israel face as they live with the status of a permanent “enemy within”.

They have had to develop a complex and supple identity to cope, and a sixth sense attuned to the constant intrigues, mounted by their own state, to weaken them and set them one against the other.

Nazareth has the largest concentration of Christians in the Holy Land but also a two-thirds Muslim majority after the city became a place of sanctuary for many refugees in 1948.

That has made it especially vulnerable to Israel’s divide-and-rule strategies.

Benjamin Netanyahu’s malign efforts to foment discord here in the late 1990s, during his first term as prime minister, have not been forgotten.

He triggered sectarian riots by backing a provocative plan to build a huge mosque overshadowing the city’s main holy site. The Basilica of the Annunciation marks the spot where an angel is believed to have told Mary she was carrying Jesus.

The fires stoked, Netanyahu then quietly dropped the mosque project.

Back in power since 2009, he has been aggressively playing the divide-and-rule card again, this time trying to take advantage of Christian fears about ISIL’s growing power in the region.

According to local media, a recent Israeli poll claimed 17 percent of Muslims in Israel “support” the Islamic State group [ISIL].

Closer inspection, however, reveals that respondents were asked not whether they supported ISIL, but if they were “ashamed as Arabs” of it. On that reckoning, even my Palestinian Christian wife might be classified an ISIL supporter.

Nonetheless, the publicity given to such polls, as well as the arrest this month of five men from Nazareth accused of setting up an ISIL cell, is unnerving some Christians. They wonder whether, or how soon, the fallout from Syria will reach them.

Netanyahu’s goal is to persuade young Christians to deny their Arab heritage, language and culture, and identify instead as Aramaeans [Getty Images]

Netanyahu is only too happy to fuel their fears.

He has recruited a Nazareth priest to his side, arguing that it is time for Christians, though not Muslims, to break their decades-old opposition to serving in the Israeli army. Young Christians, Netanyahu says, should learn how to defend themselves as Israeli soldiers, even if it means oppressing their kin in the occupied territories.

The idea is unappealing to most, but Netanyahu has carrots and sticks to entice them.

One inducement lies next to my home – land on a ridge above the Basilica. For decades the area was waste-ground, strangely empty in a city choked by chronic overcrowding, the legacy of discriminatory land allocations.

A city official tells me the plot was confiscated by the state after its owners fled in 1948. Allowed to run wild, the government has now decided to offer the land for housing, but only to Palestinians who serve in the security services.

Netanyahu hopes to exploit Nazareth’s severe land shortages, combined with the traditional obligation on Palestinian men to build a home before they marry, to arm-twist Christian school-leavers into the army.

The meddling goes deeper. His government has also approved a new nationality, Aramaean, supplementing the existing main classifications on Israeli ID cards of Jewish, Arab and Druze.

The goal is to persuade young Christians to deny their Arab heritage, language and culture, and identify instead as Aramaeans.

Shadi Halul, a former spokesman for the small group of Christians who volunteer in the Israeli army, recently won approval for the country’s first Aramaic school in his village of Jish, north of Nazareth.

When I meet him at his home, he angrily denies that he is an Arab, saying Muslim conquerors ruthlessly imposed an Arab identity on the region in the seventh century.

“We are Aramaic, but most of us have forgotten our true identity because it was denied us for hundreds of years,” he says. “The first battle is to educate Christians to regain an understanding of their history and language.”

In his view, Christians can win back influence in the region only by siding with Israel – and, given that both Jews and the first Christians spoke Aramaic, revival of the language is the key to cementing their alliance.

“You need to be a wolf to live in this region,” he says. “We must be able to defend ourselves.”

View of Nazareth looking out of the Basilica of the Annunciation [Al Jazeera]

In Nazareth, such thinking has attracted a small but increasingly vocal following. The first-ever Palestinian Christian Zionist political party is soon to launch in the city. Its main goal, aside from recruiting Christians to the army, is to build a huge statue of Jesus, modelled on Rio de Janiero’s, guarding the city’s entrance.

Khalil Haddad, a Christian tour guide and restaurant owner who is a prominent critic of Halul and his followers, fears that given time such ideas may gain ground.

He points to the paradox that these Christians are calling for loyalty to Israel at a time when they are living under communal assault – not from ISIL, or their Muslim neighbours, but from their own government and from Jewish extremists supported by the right.

This summer Israel effectively declared war on some 50 church schools, withdrawing most of their funding and forcing the teachers and pupils, my own children included, to go on strike.

And at the same time Jewish fanatics fore-bombed a famous church on the Sea of Galilee, in the gravest of a wave of “price-tag” attacks on Muslim and Christian holy sites over the past two years.

Netanyahu, Haddad says, will use the new Aramaic nationality to offer Christians privileges denied to Muslims, further sowing the seeds of mistrust.

Even Israel’s outlawing of the northern Islamic Movement last month, he believes, may have been intended in part as a way to reinforce a sense of “good” Christians and “bad” Muslims.

“Christians and Muslims have lived in shared communities in harmony for centuries,” he says. “The kind of sectarian conflict Netanyahu is cultivating will benefit Israel, and damage us.”