Israeli Prime Minister Benjamin Netanyahu wants to make his country a “super-Sparta” of the Middle East but the exorbitant cost of the war is inflating the defense budget and raising fears of setbacks for education or health.
The bill for the conflict triggered on October 7, 2023 by the unprecedented attack of the Palestinian Islamist movement on Israel from Gaza amounted to 405 billion shekels (nearly 120 billion euros) at the end of April, according to the governor of the Israeli central bank, Amir Yaron.
“It’s a huge figure, more than 17% of GDP,” he said at a recent economic conference in Herzliya, north of Tel Aviv.
The military campaign alone against Iran, triggered by the American-Israeli attack on Tehran on February 28, generated an additional cost of 35 billion shekels (10.5 billion euros) for the State until the entry into force of the ceasefire on April 8, according to an initial estimate from the Ministry of Finance.
At the end of March, after the adoption of the 2026 finance law, the government noted that the budget of the Ministry of Defense had more than doubled since October 7.
To support the war effort, Israel borrowed massively on international markets in 2024 and 2025, to the point that public debt now represents more than 69% of GDP, compared to 60% before the war, according to the Treasury. Taxes and social security contributions have also increased.
– “Economics of trauma” –
Esteban Klor, professor of economics at the University of Jerusalem, explains to AFP that Israelis are “paying twice” for the war.
The first, he said, through the reduction in State social spending and the reduction of investments in public services made by several successive budget cuts “with a planer”, even though “we are (…) in the process of increasing the debt”.
“Education will suffer, the quality of infrastructure will decline, as will the performance of the health system,” he explains.
The second cost is linked to the continued mobilization of tens of thousands of reservists since the Hamas attack. “As (…) many of our assets are in the army rather than at their workplace, this affects production,” explains Mr. Klor.
According to a survey by the Israeli Institute for Democracy (IDI), a centrally ranked think tank, 31% of those questioned say they have suffered a drop in their salary or income since October 7, and the phenomenon hits the self-employed and the most modest workers hard.
The Israeli economy nonetheless quickly overcame the shock of the war, with GDP having returned to its 2022 level by 2024 and continuing to grow at an enviable pace (+2.9% in 2025 with an acceleration expected for 2026).
But at the Herzliya conference, Tamar Levi-Boneh, co-director of the budget, warned against an “economy of trauma”, where the shock of October 7 and the feeling of failure felt by the army lead it to constantly demand more budget to ensure the security of the country.
– “Supériorité écrasante” –
“The security apparatus must learn to provide for its needs in a way that will not harm the standard of living and assume its share of responsibility,” she said.
Mr. Netanyahu defends an opposing vision, he who affirmed in September that Israel had no other choice but to become a “super-Sparta”, this ancient Greek city entirely turned towards war.
While his differences come to light with American President Donald Trump on the military campaign that Israel is waging in Lebanon against Hezbollah, but also on how to put an end to the war with Iran, the Israeli leader defends an autarkic vision, which would free his country from dependence on the enormous military aid it receives from the United States.
At the beginning of May, he confirmed his intention to invest 350 billion shekels (more than 100 billion euros) over the next decade in the national defense industry in order to guarantee “overwhelming air superiority”.
Esteban Klor warns that “the Defense budget could cross the threshold of 10% of GDP”, and calls for a rapid return to a “more reasonable” level.
Israel is one of the developed countries where inequalities are the most blatant, and the war does not help anything. According to the latest available study from Israeli Social Security, the proportion of children living below the poverty line increased from 27.6 to 28% between 2023 and 2024.
published on June 7 at 11:51 a.m., AFP
