Even before the Israeli government decided to launch Operation Pillar of Cloud in Gaza there were well-established assessments that the government that will be elected in January 2013 will face a difficult economic situation. GDP growth is 3%, the lower limit below which it is possible to talk about a slowdown. The conventional wisdom across the political spectrum was that the economic and fiscal situation would require difficult decisions and that this was why Prime Minister Benjamin Netanyahu decided to call early elections, before he would have to deal with embarrassing issues about priorities.
The decision to launch a military campaign in Gaza will necessarily worsen the economic situation. As long as the fighting continues, it will not be possible to estimate its costs or discuss its consequences. But it is clear that the Ministry of Defense will hit the taxpayers the bill for every missile and every bullet fired and for every hour of flight time by Air Force planes. If we add the damage to economic activity, a cautious estimate adds several billion shekels to the budget hole.
Moreover, the budget hole is deepening just when the economy is cooling down beyond what was expected before last week. In Israeli economic terms, growth below 3% is a slowdown, and growth below 2% is a recession. Austerity measures under these conditions will cause problems not only within the government, but also on the street, where in the summer of 2011, the Israeli public showed that it has the power to show politicians just what it thinks of them.
Missiles against socioeconomic debate
But time will pass, possibly months, until politicians realize this, and in the meantime, there is a war to finish and elections to get through. The elections ought to have been straightforward, according to all the commentators: Prime Minister Benjamin Netanyahu is fireproof and invulnerable, according to every analysis, because they think that the military campaign has erased the economic debate, which he and the commentators fears so much.
The question is to what extent will the economy be forgotten in the coming months, because if it is forgotten, every prediction about who is vulnerable and who is not becomes invalid. In fact, if there is one issue from which Netanyahu will flee as if from fire, it is the price of the war and the economic situation that will prevail after it. The question that the prime minister does not want to hear asked is how will the war be financed, and who will pay for it, because the moment these questions are raised, it is obvious who will pay, and who will not. This will bring the public discussion back the socioeconomic issues from which he wants to flee.
In truth, this period will not last long. On election day on January 23, we will begin to hear from whomever is elected prime minister that the public must prepare for "painful measures", even while making the usual promises about "protecting the weak", "responsibility", and "proportionality". He will have no idea how to do this, but at least on television, he will sound statesmanlike and will present the elected officials as if they have some idea about to emerge from the situation this time.
Published by Globes [online], Israel business news - www.globes-online.com - on November 18, 2012
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