The high cost of Israel’s wars could lead to difficult decisions – Naharnet

Israel’s war against Hamas and Hezbollah has taken a toll not only in human lives but also in financial costs, raising concerns about the long-term impact on the economy. Military spending has skyrocketed, reaching $27.5 billion last year, and the economy has suffered, with a 5.6% shrinkage in output following the attacks.

The government is now facing tough choices between social programs and military funding, with a credit rating downgrade by Moody’s Ratings. Despite the challenges, Israel’s economy remains strong, with low unemployment and a thriving tech sector.

To cope with the financial strain, the government is considering tax increases and cuts in social spending. The U.S. has stepped in with increased military aid, helping to alleviate some of the pressure.

Looking ahead, Israel is working on a plan to assess defense budget needs and economic impacts, aiming for a postwar rebound. Economist Zvi Eckstein suggests a budget that includes tax hikes and social spending cuts to support ongoing defense costs and economic recovery.