Israel’s surreal economic reality during the war - opinion

There’s a prevalent feeling that our reality keeps getting increasingly surreal, unexpected, or strange in ways that we would not normally expect.

For example: the recent announcement by Moody’s – one of three major international credit rating agencies – that it had decided to reduce Israel’s credit rating from A1 to A2, for the first time. The agency’s rationale is that Israel’s prolonged war against Hamas will become a significant long-term economic and political burden for the country, not least of all because of the way the current government is managing the situation. 

Moody’s concluded from this assessment that “the ongoing military conflict with Hamas, its aftermath, and wider consequences materially raise the political risk for Israel as well as weaken its executive and legislative institutions and fiscal strength, for the foreseeable future”.

Moody’s must also be aware that the American financial and diplomatic commitment to Israel does not seem as solid today as it did during the first three months of Israel’s war against Hamas. The fact that several weeks ago Prime Minister Benjamin Netanyahu spoke of the need for Israel to establish self-sufficiency for itself in the manufacture of munitions indicates that he is aware of the risks in this field.

A surreal announcement 

Moody’s announcement is viewed by both Netanyahu and Finance Minister Bezalel Smotrich as politically motivated and surreal, since they both keep speaking of the basic strength of the Israeli economy, despite some current economic setbacks. They consider these to be temporary, and they also cite the updated 2024 budget, which, in their opinion, addresses the issue of Israel’s new economic reality seriously.

I am not aware of any recent poll that tried to establish what percentage of the Israeli Jewish population accepts Netanyahu’s and Smotrich’s persistent reassurances that the Israeli economy is strong and stable, and resistant to Israel’s credit rating being reduced.

Anyone who has persistently accepted their reassurances considers the current situation that fell upon us last Friday – which might well be followed by the other two credit rating institutions (S&P Global Ratings and Fitch Ratings) following suit – as a surreal development. The surreal reality was that the international credit institutions accepted our leaders’ reassurances for four months. Moody’s current move is a return to reality.

A SECOND surreal reality concerns the whereabouts and actions taken by Hamas leader Yahya Sinwar. For four months we were led to believe that Sinwar was hiding in bunkers underground, surrounded by Israeli hostages, but that at the same time he was effectively running Hamas’s battles, and making decisions on its behalf.

In the talks for a deal to release the remaining 136 hostages held by Hamas, it was thought that Sinwar was still moving around in underground hiding places, and calling the shots with extreme positions.

Now we are being told by anonymous security forces that Sinwar had been cut off from any outside communications since the end of January – either as a tactic to avoid capture or as an authentic breakdown of communications. 

Either way, who is “negotiating” and calling the shots on behalf of Hamas: Sinwar, or the Hamas leaders living in luxury in Qatar?

Another surreal reality is Israel’s refusal to address the question of who will run the lives of two million Palestinians in the Gaza Strip after the war is over (assuming that they will remain in the area). For that matter, who is responsible for running the lives of the civilian population there today?

Israel complains that whenever it removes its forces from an area in the Gaza Strip (especially in the North), Hamas turns up to distribute part of the humanitarian aid entering the Gaza Strip from Egypt and Israel.

They are also performing pseudo-policing activities and various other services. Israel (primarily Netanyahu) just keeps stating who should not, or will not, run the civilian matters in the Gaza Strip, whether now or in the future – not Hamas, (though it is still there, in a way), not the Palestinian Authority, not UNRWA, and not Israel, which insists only on preserving an effective military presence in the Gaza Strip once the war ends.

Yet another element of our surreal reality is the fact that since the beginning of the war around 250,000 Israelis (including 50,000 toddlers and school children) have been evacuated by the government to hotels in various parts of the country.

 Some have moved of their own volition from settlements in the North and the Gaza border area in the South because of the ongoing security situation. Since the Israel-Hamas war began, some 350,000 Israelis have been called up, or volunteered, for prolonged reserve military duty.

Some of those displaced have returned to their homes, or have found temporary accommodation away from their permanent residences. 

Most reservists have been released (at least temporarily – until being called up again) after serving in the Gaza Strip and the North for three to four months. But at least 600,000 persons (around 6% of the total population) have had their everyday lives seriously disrupted. Businesses are in serious financial straits, and jobs have been lost.

In addition, some of these internally displaced people have also experienced horrendous personal tragedies involving murders and abductions of family members and friends by Hamas terrorists. Thousands of reservists are experiencing symptoms of post-trauma at a time when there is a shortage of social workers, psychologists, and other professionals to help them cope. Another surreal reality.

The last surreal reality concerns how the government is coping with some of the country’s current acute problems – for example, the IDF’s manpower shortage. The IDF is trying to cope with this problem by prolonging the service period of those who serve in mandatory military service and reserve duty.

And who is left out of this whole rigmarole? The haredim, most of whom have never served in the military, and according to the new rules and regulations will not serve in the future either.

Nevertheless, when the question came up in the Knesset plenum regarding why those in pre-military training frameworks – both secular and national religious – should be called up earlier for military service, Defense Minister Yoav Gallant had Meir Porush, minister of Jerusalem Affairs and Heritage (United Torah Judaism), reply on behalf of the Defense Ministry.

Porush’s explanation sounded like the epitome of hypocrisy and audacity, coming from a haredi minister – considering that neither he, nor his children, nor grandchildren have served in the military for a single day.

What on earth was Gallant thinking, and when, if ever, shall we return to saner, less surreal days?

The writer worked in the Knesset for many years as a researcher, and has published extensively both journalistic and academic articles on current affairs and Israeli politics. Her most recent book, Israel’s Knesset Members – A Comparative Study of an Undefined Job, was published by Routledge.