{"id":252756,"date":"2024-09-23T10:45:46","date_gmt":"2024-09-23T14:45:46","guid":{"rendered":"http:\/\/stateofthenation.co\/?p=252756"},"modified":"2024-09-23T10:49:17","modified_gmt":"2024-09-23T14:49:17","slug":"the-zionist-state-of-israel-is-collapsing-in-real-time-and-theres-no-stopping-it","status":"publish","type":"post","link":"http:\/\/stateofthenation.co\/?p=252756","title":{"rendered":"

The Zionist state of Israel is collapsing in real time and there’s no stopping it.<\/span><\/b><\/h1>"},"content":{"rendered":"

<\/p>\n

War-fatigued Israel faces brain drain one year on from Hamas attack<\/h1>\n

Low unemployment and debt levels hide the country\u2019s growing strain<\/h3>\n

Eir Nols\u00f8e
\nThe Telegraph<\/a><\/p>\n

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Illustration: Israel’s economy<\/span><\/h5>\n<\/div>\n
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In Tel Aviv, Bj\u00f8rt Kragesteen and her Israeli partner are packing all of their belongings into boxes. Next week they are leaving for Stockholm where she will take up a role as assistant professor.<\/p>\n

\u201cI don\u2019t want to live here again,\u201d Kragesteen says. \u201cThat is something the war changed for me.\u201d<\/p>\n

These days, the 37-year-old\u00a0molecular genetics researcher sleeps in her clothes every night and the keys are always in the same spot next to the door.<\/p>\n

If a missile alarm goes off, she and her partner have 90 seconds to grab their two-year-old daughter and run 150 metres to a bomb shelter by a playground.<\/p>\n

\u201cI have made so many runs with Ruth to that bomb shelter,\u201d she says. \u201cI\u2019m always alert. It is completely exhausting.\u201d<\/p>\n

For months she and other parents took turns during the week to keep watch at the nursery, ready to help bring all of the children underground in case of missiles.<\/p>\n

This war-induced fear has been the catalyst for many friends to move too, she says.<\/p>\n

\u201cThey all have young kids and want to build a brighter future in Europe. Some friends don\u2019t have EU passports and are feeling a bit lost, looking for other ways to leave.\u201d<\/p>\n

A year into one of the bloodiest conflicts in Israel\u2019s history, the economic consequences are beginning to appear, despite data seeming stable.<\/p>\n

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Parents take turns to keep watch at the nursery and bring children underground in case of missiles – Shir Torem\/REUTERS<\/span><\/h5>\n<\/div>\n

Debt levels are far lower than in many other rich countries, inflation is elevated but under control and unemployment remains low.<\/p>\n

However, a closer look reveals growing strain.<\/p>\n

One concern is that many highly educated and skilled workers, including Kragesteen and her partner, are leaving, deciding to raise their children away from missile alarms.<\/p>\n

Compounding this problem is the fact that attracting new talent to a country at war is tough.<\/p>\n

Nobel prize-winning scientist Aaron Ciechanover last month warned in a speech that \u201cthere is a huge wave of departures from the country\u201d.<\/p>\n

\u201cMost senior doctors are leaving the hospitals; universities are finding difficulties in recruiting faculty members in critical areas,\u201d he said, warning that this community is \u201cvery narrow\u201d.<\/p>\n

\u201cAs soon as 30,000 of these people leave, we won\u2019t have a country here\u201d, he said.<\/p>\n

The exit of talented workers is particularly concerning for Israel\u2019s lucrative tech sector, says Alon Eizenberg, an associate economics professor at the Hebrew University in Jerusalem and an adviser to the Bank of Israel.<\/p>\n

The industry, which makes up a disproportionate share of gross domestic product, is very important to the economy.<\/p>\n

\u201cSome brain drain and loss of human capital will be inevitable,\u201d he says. \u201cThat also happened after the Yom Kippur War in the 1970s because it was a devastating experience for many and it had a destabilising effect on people.<\/p>\n

\u201cThere is no doubt that when a country undergoes something like October 7 and the war some people will leave, maybe temporarily, maybe for good.\u201d<\/p>\n

However, Eizenberg is unconvinced by the gloomiest predictions.<\/p>\n

\u201cWe will need a little bit more time before we can tell from data what is actually happening. My own position is that I do not believe that it would be this severe,\u201d he says.<\/p>\n

Eizenberg also suggests that Jews living outside Israel may choose to immigrate if they are concerned about the threat of anti-Semitism in other corners of the globe.<\/p>\n

From a fiscal perspective, Israel\u2019s economy shrank by 5.7pc in the final three months of 2023, reflecting the impact of the Oct 7 Hamas attacks and subsequent war.<\/p>\n

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It has since recovered somewhat, growing 3.4pc in the first three months of the year, followed by a more sluggish 0.2pc in the following quarter.<\/p>\n

\u201cOverall, the economic picture is not as bad as you might have expected,\u201d says Eizenberg. \u201cOf course, there is an impact of the war. But somehow economic activity has not really collapsed in any way.\u201d<\/p>\n

For most people, this means that while life has undeniably changed, it is not always immediately apparent.<\/p>\n

Kragesteen says that in Tel Aviv \u201csome places have shut, but we don\u2019t notice it much\u201d.<\/p>\n

\u201cPeople are continuing to go to restaurants, parties, do yoga and drink coffee like before,\u201d she adds.<\/p>\n

Yet going on holiday has become more expensive as foreign airlines have pulled away and those still operating have hiked prices. Meanwhile, the Israeli shekel has also weakened against the euro, adding to a longer running decline.<\/p>\n

Separately,\u00a0Houthi attacks in the Red Sea have disrupted shipments<\/a>, meaning securing items from abroad has become more expensive and challenging.<\/p>\n

Unsurprisingly, the tourism industry has also suffered.<\/p>\n

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According to Coface BDI, an Israeli research firm, as many as 60,000 businesses could shut in 2024, with Eizenberg claiming that many smaller-sized companies are struggling.<\/p>\n

\u201cA big chunk of the labour force have been called on reserve service duty, sometimes for many months. So that could be the business owner or most of your labour force.<\/p>\n

\u201cThat introduces a lot of friction. You are basically facing a shortage of workers that are already skilled and trained to do particular things,\u201d he says.<\/p>\n

The agricultural industry has suffered, as people in both the north and the south have been evacuated and are unable to work. As a result, food prices have risen.<\/p>\n

Construction has also stalled amid the absence of 80,000 Palestinian construction workers, mostly from the West Bank. Efforts to replace them with other foreign workers have so far failed, fuelling concern over rising house prices.<\/p>\n

For ordinary people, the rising costs of food and housing in particular are becoming increasingly apparent.<\/p>\n

Omer, a 38-year-old Israeli living in a kibbutz 20 minutes outside Tel Aviv who works in digital marketing, says this has been challenging for many.<\/p>\n

\u201cThe rising food and housing costs people find the hardest to deal with. Food is essential to live, and home is shelter. When they are really expensive, [it makes] it very hard psychologically,\u201d he says.<\/p>\n

As for the public purse, the costs of war are beginning to mount.<\/p>\n

The governor of the Bank of Israel warned in late May that the country would spend around $67bn (\u00a350bn) on defence and civilian costs between 2023 and 2025.<\/p>\n

\u2018New phase of war\u2019<\/h2>\n

There is no end in sight. The Israeli defence minister warned this week that the country was in a \u201cnew phase of war\u201d, with many goals still to achieve.<\/p>\n

Fears of a wider escalation are rising after\u00a0Israel blew up devices used by Hezbollah<\/a>\u00a0members in Lebanon.<\/p>\n

Should the war intensify in the coming months, it could increase costs further, says Eizenberg, adding to the uncertainty for the economy.<\/p>\n

\u201cYou have this type of asymmetric war with terrorist organisations where it\u2019s not a matter of just storming in and going into battle with another army, and then within a few days or weeks it\u2019s settled. This war takes a long time.<\/p>\n

\u201cIt\u2019s not obvious how long it will take before you can remove all these limitations on the economy and people in the north can return to their homes,\u201d he says.<\/p>\n

Itai Ater, at Tel Aviv University who heads a forum of leading Israeli economists, says he is deeply concerned about the fiscal situation and what further escalation could mean.<\/p>\n

The three main credit rating agencies \u2013 Fitch, Moody\u2019s and S&P \u2013 have already downgraded Israel since the onset of the war.<\/p>\n

Meanwhile, the country has gone from running budget surpluses to a deficit of 8.3pc of gross domestic product in the 12 months to August, which could well worsen.<\/p>\n

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It has already spent \u00a319bn on the war since it began last October.<\/p>\n

The government is \u201ccompletely dysfunctional\u201d, Ater says, warning that it \u201ccannot keep raising the spending so much without taking serious steps.\u201d<\/p>\n

\u201cThe government is not rising up to the challenge. We don\u2019t see them making tough decisions that are needed. If there is also an escalation in the north, it will be a huge blow to the economy,\u201c he says.<\/p>\n

Israel used to have one of the highest scores in the world on indexes measuring happiness.<\/p>\n

However, these days everyone is overwhelmed by the constant stream of bad news, he adds.<\/p>\n

Back in Tel Aviv, Kragesteen is busy packing.<\/p>\n

\u201cPeople are generally exhausted,\u201d she says. \u201cEven the older generation feels uncertain about their future here. My partner\u2019s mum came here from Tripoli in 1967 and has lived through all of the intifadas. This is the first time she wants to leave too.\u201d<\/p>\n

\u201cThe future feels very uncertain here.\u201d<\/p>\n<\/div>\n

___
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