Israel’s cabinet is preparing to pass an austerity budget for 2025 that hits taxpayers hard—all in the name of “security.” Behind these budget cuts and tax hikes lies an economy stretched thin by the ongoing wars with Gaza and Lebanon, with a 40-billion-shekel budget slash aimed at funding these protracted conflicts. But is this the right call, or just another example of national defense draining the public?
The Cost of War, in Shekels and Sacrifice
Since the attack by Hamas on October 7, Israel’s financial lifeline has been steadily trickling away, with military costs now totaling tens of billions of shekels. And it’s not just weapons; there are massive payouts to compensate those impacted by reserve duty and the general havoc of war. Prime Minister Netanyahu himself admits that the security of the nation is tied to the economy, yet he’s ready to fund the military machine at the expense of the average Israeli. It’s the classic paradox: a thriving military with an increasingly strained civilian economy.
Inflated Costs, Zero Growth, and Soaring Inflation
Israel’s economy has ground to a near halt. With no growth and supply chain issues pushing up inflation, life for Israelis has gotten harder by the day. The country’s credit rating is plummeting, financing costs are up, and inflation refuses to budge from 3%. The central bank, hamstrung by war expenditures, has kept interest rates high, eliminating any chance of rate relief. Now the government wants to impose austerity on top of all this? The only people seeing any “security” here are those profiting from war.
2025’s Budget: Cutting Costs, But at What Price?
The budget proposes a 40-billion-shekel combo of spending cuts and tax hikes, with an eye to reducing the deficit to 4% of GDP. As of now, that deficit sits at a hefty 8.5%. This austerity comes with a VAT hike from 17% to 18%, hitting everyday Israelis in their pocketbooks. Finance Minister Bezalel Smotrich proudly declared that the military won’t have an “unlimited” budget next year, with only 102 billion shekels allocated. Perhaps he should explain why there’s still enough in the budget for a bloated military while regular citizens are squeezed for every shekel.
Smotrich’s message? The economy serves security. “We will end the war with victory and bring security and with it also a good economy,” he said at the cabinet meeting. Easy words for those not paying the price at the grocery store.
Is Economic Growth Just a Pipe Dream?
Forecasts predict a dismal 0.4% growth rate for 2024, with a hopeful but highly uncertain 4.3% for 2025. Yet this optimism seems misplaced. We’re witnessing Israel’s longest, most expensive war—a war that’s forcing the government to gamble on financial austerity just to keep up with defense spending. Smotrich lauds the country’s “great resilience,” but how much longer can the Israeli people withstand these relentless sacrifices?
As the budget inches closer to approval, it’s clear that the burden of “security” is falling squarely on the people, not the policymakers. Is this strategy truly sustainable, or just a road to deeper debt and higher taxes?
