Israel's War Costs Strain Economy

Israel is facing severe economic challenges due to the enormous costs of its multi-front war, which began with Hamas's attack on October 7, 2023. The total cost of these conflicts reached 405 billion shekels ($138 billion) by late April, representing over 17% of its GDP. The military campaign against Iran alone cost an additional 35 billion shekels ($12 billion). Prime Minister Benjamin Netanyahu's vision to transform Israel into a 'super-Sparta' is driving a substantial increase in the defense budget, which has more than doubled since October 2023. To finance these efforts, Israel has heavily borrowed on international markets, pushing public debt to over 69% of GDP, up from 60% before the war. This has also led to increased taxes and social security contributions. Economists warn of a 'trauma economy' where military demands could undermine the standard of living, with fears of cutbacks in education, healthcare, and infrastructure. The ongoing mobilization of reservists is also impacting production and leading to a decline in wages for many Israelis, particularly the self-employed and low-income workers. Inequality is worsening, with the proportion of children living below the poverty line rising. Benjamin Netanyahu also plans to invest 350 billion shekels over the next decade in the national defense industry to achieve greater self-sufficiency, potentially reducing reliance on military aid from the United States.