Why the war on Gaza is bad for Israel

The effect of the war on Gaza on the Israeli economy has been more pronounced than the political fallout

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Israel’s Gaza war has cost the country far more than the death of 64 soldiers, with growing domestic discontent and negative economic repercussions.

This discontent was clearly demonstrated when some 10,000 Israelis protested in Tel Aviv on Thursday, in the largest public display of disapproval of the government since hostilities began on July 8.

Protesters complained of feeling betrayed by Israeli Prime Minister Benjamin Netenyahu’s government for failing to stop rocket attacks into Israel from Gaza, Reuters reported.

They believe that the Israeli government has not fulfilled its pledge to restore calm to southern Israel and destroy underground tunnels seen as launch pads for attacks from Gaza.

A woman holds up a placard during a peace rally in Tel Aviv's Rabin Square August 16, 2014. Reuters
A woman holds up a placard during a peace rally in Tel Aviv's Rabin Square August 16, 2014. Reuters

“Netanyahu should be worried from the criticism he is facing,” Ron Gilran, the Vice President of Intelligence at the Levantine Group and a Middle East-based risk-consultancy, told Al Arabiya News.

“He is now facing criticism from ... the right for not hitting Hamas harder” and “from the left, for once again negotiating [with] Hamas instead of talking and "strengthening" President [Mahmoud] Abbas,” he said.

Israel's war on Gaza has stirred much controversy within as well as outside the country.

“Most Israelis do not wish to control the territories of Gaza and the West Bank,” Gilran said.

“The majority of Israelis question whether giving Palestinians land and statehood will indeed bring an end to the conflict,” he said, adding that on the long term more division among Israelis could emerge depending on the outcome of the talks in Cairo.

Infographic: Israel counts Gaza war losses

Infographic: Israel counts Gaza war losses
Infographic: Israel counts Gaza war losses

The debate about this war became even more heated this week when Israeli human rights group B’Tselem said some military strikes in Gaza were illegal.

The move, which was seen by Israel as reflecting pro-Palestinian sympathy by the group, led the country’s National-Civic Service Authority to stop providing voluntary staff for the organization.

B’Tselem director, Haggai Elad, described the ban as politically motivated and undemocratic.

The volunteers would have been Israeli youth opting to do non-military, voluntary service rather than serve in the Israeli army.

“The biggest problem Israelis have with B’Tselem is not that its sympathizing with Palestinians, but that it doesn't sympathize with Israelis, Gilran said, adding that Israelis often considers the group “not as a human rights group but a pro-Palestinian group.”

The effect of the war on Gaza on the Israeli economy has been more pronounced than the political fallout as the country starts to count its losses.

“No doubt there is an accumulated impact of the war on the Israeli economy,” Yossi Mekelberg, the program director of International Relations and Social Sciences at Regent's University, London, told Al Arabiya News, adding that “the overall costs might end at 4 billion to 5 billion Israeli shekel [$1.1 billion to $1.4 billion].”

On Sunday, the Central Bureau of Statistics said that Israel's economy grew at an annualized rate of 1.7 percent in the second quarter, its slowest since early 2013 and well below expectations.

Israel's war against Palestinian militants in Gaza is expected to shave as much as half a percentage point from growth this year, the Israel-based bureau said.


The growth rate was the slowest since a 1.6 percent recorded in the first quarter of 2013.

Meanwhile, exports, which comprise 40 percent of Israel's economic activity, slid 17.7 percent in the second quarter after virtually no change the previous three months.

El Al Israel Airlines, Israel’s main airliner, this week said its third-quarter revenue would be hurt more than previously expected by the Gaza war, due to cancellations.

The firm said the conflict would reduce its revenue for July-September by $55 million to $65 million and that this would have “an adverse impact on the company’s third-quarter results.”

Meanwhile, tourism has nosedived as rockets from Gaza and images of people rushing to shelters triggered a wave of cancellations at the height of the peak tourism season.
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In July, 218,000 visitors were recorded entering Israel, 26 percent down from a year ago, and the lowest number for any July since 2007, according to the Central Bureau of Statistics.

The economic downturn has in turn affected monetary stability in Israel. Last week, the U.S. dollar enjoyed gains against the Israeli currency, the shekel, of a kind not seen in more than a year.

Some analysts argue, however, that the devaluation of the Israeli shekel was not a consequence of the war and believe the real threat lies in warning from the European Union.

“The Bank of Israel deliberately devalued it because the currency gained around 8 percent in relation to the U.S. dollar which affected exports,” Mekelberg said,adding that the real risk was coming from the EU.

EU states have also recently warned companies against doing business with Israeli firms that are based in settlements or have links with them.

“This [the EU warning] might be a move toward economic steps against Israel if it doesn't comply with international law, in terms of the way it conducts her war with the Hamas, building settlements or more generally maintaining the occupation,” he said.

“The European Union is a major trade partner and source of investment in R&D,” he added.

Israel’s losses will not be limited to the duration of the Gaza war despite the ongoing truce talks currently taking place in Cairo.

“There might be much deeper residues that will remain [from this war],” Mekelberg said.

The question remains whether these residues that have damaged both sides will convince both Israel and the Palestinians to seek a sustainable end to hostilities.

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