Why would a loving God prefer one nation over another? Deuteronomy 14:2


  "For you are a holy people to the LORD your God, and the LORD has
  chosen you to be a people for His own possession out of all the
  peoples who are on the face of the earth. "


First, this sounds like God is a racist or nationalist, that he prefers one nation over another.  But I came to my own understanding of why God chose Jewish people to be "his" nation: He had to choose one nation where His son would be born, and Jewish people happened to meet all the requirements, or they responded in a right way.

I'd like to ask, though, what is the stand of the Roman Catholic church as to why God chose Jews and not Celts or other nations? And do other Christian groups share the same view as Catholics?
The official position of the Catholic Church is that the Church is synonymous with the "chosen nation," and that the Church in Christ is the continuation of the righteous nation that God has set apart for himself since the beginning. Through the Catechism, the Church states that while God chose Abraham and his descendants through the promise the be his nation, he does not exclude other nations, but indeeds welcomes the people of all nations into this holy nation through faith, which is the Church. From the Cathechism, (emphasis is this author's)


  60) The people descended from Abraham would be the trustee of the promise made to the patriarchs, the chosen people, called to prepare for that day when God would gather all his children into the unity of the Church. They would be the root on to which the Gentiles would be grafted, once they came to believe.
  
  201) To Israel, his chosen, God revealed himself as the only One: "Hear, O Israel: The LORD our God is one LORD; and you shall love the LORD your God with all your heart, and with all your soul, and with all your might." Through the prophets, God calls Israel and all nations to turn to him, the one and only God: "Turn to me and be saved, all the ends of the earth! For I am God, and there is no other.. . To me every knee shall bow, every tongue shall swear. 'Only in the LORD, it shall be said of me, are righteousness and strength.'"
  
  759) "The eternal Father, in accordance with the utterly gratuitous and mysterious design of his wisdom and goodness, created the whole universe and chose to raise up men to share in his own divine life," to which he calls all men in his Son. "The Father . . . determined to call together in a holy Church those who should believe in Christ." This "family of God" is gradually formed and takes shape during the stages of human history, in keeping with the Father's plan. In fact, "already present in figure at the beginning of the world, this Church was prepared in marvelous fashion in the history of the people of Israel and the old Advance. Established in this last age of the world and made manifest in the outpouring of the Spirit, it will be brought to glorious completion at the end of time."
  
  762) The remote preparation for this gathering together of the People of God begins when he calls Abraham and promises that he will become the father of a great people. Its immediate preparation begins with Israel's election as the People of God. By this election, Israel is to be the sign of the future gathering of All [sic] nations. But the prophets accuse Israel of breaking the covenant and behaving like a prostitute. They announce a new and eternal covenant. "Christ instituted this New Covenant."


In summary of these paragraphs, God chose Abraham to be the progenitor of this holy nation as it existed under the old covenant, though all people are called into it. As Christ instituted the New Covenant, all  people are similarly called to enter into this holy nation, which is and has been his Church. 

As for why Abraham was chosen from among the nations, the Catechism quotes Paul in romans 4:18 to say that, just as those who are included in the holy nation in Christ are such by faith, Abraham believed, and it was because of this belief that he was chosen. 


  1819) Christian hope takes up and fulfills the hope of the chosen people which has its origin and model in the hope of Abraham, who was blessed abundantly by the promises of God fulfilled in Isaac, and who was purified by the test of the sacrifice. "Hoping against hope, he believed, and thus became the father of many nations."