Israel Faces Existential Threat: War Amplifies Internal Polarization and Economic Crisis

The ongoing war in Israel has profound implications for both the societal and economic landscapes of the nation. As reported by Israeli media, there is a marked deterioration in social cohesion amid rising internal polarization. A recent study by psychologist Nimrod Nir revealed that public sentiment has shifted dramatically since the onset of the conflict with Hamas. Initially, around 80% of respondents felt that the war had united them; however, this number has plummeted to a 50-50 split, reflecting a growing divide.

Economically, the situation is equally grim. Estimates suggest that the war could cost Israel up to a staggering $66 billion by the end of the year, severely impacting the once-strong Israeli market. The deficit has skyrocketed from a zero balance at the beginning of 2023 to an alarming 8.1% of the gross domestic product by July 2024, equating to approximately $42 billion. Former Bank of Israel Governor Jacob Fraenkel has warned that the government has lost credibility among investors, which could lead to a severe economic crisis if not addressed promptly.

Experts, including former bank executives, are voicing concerns that without immediate and effective measures, Israel could face a dangerous collapse. The internal strife, compounded by the war, poses an existential threat to the nation, as highlighted by Nir. The urgent need for a strategic resolution to the escalating economic turmoil is paramount, as the nation navigates through these turbulent times.