Hebrew Report: Israel Races Toward a Political and Economic Abyss

SadaNews Economy - The Hebrew economic newspaper "Calcalist" paints a conflicting picture of the situation in Israel, combining a significant economic achievement represented by a massive $25 billion technology deal, and the accelerating diplomatic decline reflected in financial pressures, commercial threats, and calls for international sanctions, alongside the emigration of skilled professionals. This contrast clearly reflects the extent of overlap between politics and economics at a critical moment threatening the foundations of Israeli stability.

The newspaper reported that the past week witnessed two pivotal economic events: the first being the announcement of the acquisition of the Israeli company "CyberArk" by the American company "Palo Alto" for $25 billion, in one of the largest sales in the technology sector in Israel's history.

The second event involves the deepening diplomatic isolation of Israel, with an increasing number of Western countries recognizing the Palestinian state, including countries traditionally considered its allies, amid rising calls to impose economic sanctions.

Calcalist believes that many Israelis think there is no connection between the two issues, or that the robustness of the macroeconomy will protect them from the impacts of political isolation, but the reality is quite the opposite.

According to the newspaper, the war in Gaza is seeping into boardrooms, and the boycott has begun to knock on the doors of banks, markets, and even innovation projects.

The paper revealed that an Israeli businessman in the technology sector received an official refusal from "Santander" Bank - the second-largest bank in Europe by market value ($107 billion) - to open a business account.

The message he received from one of the bank's branches in Portugal stated, "After several attempts to open the account, we regret to inform you that we are not authorized to open accounts for representatives from conflict areas, such as Israel."

Although the economic ministries in Jerusalem have not issued an official statement, a senior official, who requested anonymity, clearly stated, "This is not a new situation. Santander Bank has been causing significant difficulties for Israel for a long time."

The newspaper mentions that the bank has over 8,000 branches in Europe, Latin America, North America, Asia, and North Africa, making the situation extremely precarious, even if it appears to be a "personal decision."

The same official pointed out that "the decision must be supported by top management to issue a message in this manner," and no official comments have been issued by Santander Bank at the time of the report's publication.

In a striking contrast, while "old" Israel reaped the fruits of its investments in education and technology through the CyberArk deal, "new" Israel was receiving a painful diplomatic slap.

Contrary to Prime Minister Benjamin Netanyahu's attempts to associate the success of the deal with himself, one of the company's founders, Alon Cohen, in an open letter published in September 2023, confirmed that neither Netanyahu nor his governments had any connection to the success of the cyber sector. Cohen concluded his letter by saying, "If Netanyahu really wants to contribute to the sector, he should resign immediately."

In contrast, Netanyahu does not accept any responsibility for the ongoing diplomatic collapse, although, according to Calcalist, he is "entirely responsible for this collapse."

After widespread support for Israel following the "Al-Aqsa Flood" operation on October 7, 2023, Western countries began to turn their backs.

France, Britain, Canada, and Germany - four of Israel's most important trading partners - announced their intention to recognize Palestine, joining Slovenia, Spain, Ireland, and Norway. Sweden and Portugal demanded the cancellation of the free trade agreement with Tel Aviv and the imposition of economic sanctions, while the Netherlands barred two ministers from Netanyahu's government, Itamar Ben Gvir and Bezalel Smotrich, from entering its territory.

%12 of Israeli GDP is at Risk

The newspaper notes that trade with Europe represents more than 12% of Israeli GDP, making the economic consequences of any political deterioration substantial and immediate.

In 2024, the volume of Israeli exports to the European Union reached $16.7 billion (excluding diamonds), while its imports of European goods amounted to $30.7 billion, indicating that approximately $47 billion of commodity trade is at risk.

According to data from the Israeli Central Bureau of Statistics, of the top 10 export markets for Israel, there are 5 countries (Ireland, the Netherlands, Germany, Britain, and France) that either threatened or took concrete steps against Tel Aviv over the past year, with a total export value to these countries reaching $10.7 billion.

However, Israel is not only a goods-exporting country but also a service economy, with the services sector accounting for about 70% of GDP. In 2024, service exports reached $84 billion, of which 63% was technological.

The value of technological service exports to Europe is estimated at about $13 billion, accounting for 77% of total commercial service exports to the continent, which total $16.8 billion.

Additionally, European commercial service imports to Israel reached $7.9 billion, bringing the total volume of services trade with Europe to nearly $25 billion.

By aggregating commodity and services trade, the total amounts to $72 billion, roughly 245 billion shekels, which exceeds 12% of the GDP, the newspaper states.

Despite the fact that America remains Israel's most important market and that U.S. President Donald Trump "threatens those who threaten us," according to the newspaper, Trump has no authority over European decisions nor over the markets that Tel Aviv may lose.

The implications of the crisis are not limited to the economy and the boycott, as Calcalist registers a rapid social hemorrhage manifested in the emigration of minds and capital. Since the formation of the current government, supporters of "old Israel" have begun to leave, and according to a study by Professor Moshe Dahan, Netanyahu's bloc receives 80% of the votes from the poor, compared to only 27% from the upper classes, while liberal elites vote 71% for opposition parties.

Official data indicate a 50% surge in immigration requests in 2023 - the year of the "judicial overhaul" - amounting to 55,300 individuals, while the net negative migration reached 27,500, more than double the previous annual rate.

The number of Israelis residing abroad without long visits has also increased by 25% since the current government took office, and emigration includes startups as well, with estimates suggesting that 50% to 80% of those founded outside the country in 2023 originated there. Despite the ongoing flow of funds, the newspaper warns that what is being sold today was built over decades, and destruction only takes moments.

Calcalist concludes that "new Israel" has become a non-liberal state with authoritarian features, distributing budgets on a political basis and seeking a perpetual war, while "old Israel" chooses to leave it.