Israeli economy on the brink of the abyss

Not to mention the problems in the Israeli army, while Hezbollah thrives despite decapitations, Israeli bombings and ground invasion in Lebanon.

Note to readers: the article exceeds the length limits of the e-mail. To read it in its entirety, just click on the title to open the full online version.

Focus on the Israeli economy

From Al Mayadeen.

In the last week or so a few reports on the financial and economic situation in Israel have depicted a quite gloomy picture, but you will not read these in the Western mainstream media (MSM).

Let’s start with this Al Mayadeen article, which shows how the Israeli wars on Gaza and Lebanon are “dealing major financial blows to ‘Israel’”, quoting Israeli media.

For instance, according to Yedioth Ahronoth (Ynet), the daily cost of the war in Lebanon has exceeded half a billion shekels ($135mln) per day, after recent escalations, and it is likely to rise even further in the near future, due to the “high costs of large amounts of ammunition and the need to fire hundreds of expensive interceptor missiles”. Speaking of which, a senior official of the Israeli “Defense” Forces quoted by Walla! said that the cost of the ammunitions used for the assassination of Hezbollah’s Secretary-General Sayyed Hassan Nasrallah was 25 million shekels ($6.7mln), whereas Ynet reported that “the combined cost of expanding the war in Lebanon and the ongoing war on Gaza has reached approximately 25 billion shekels ($6.7bln) since the beginning of September 2024”.

The Jerusalem Post was also quoted in the same Al Mayadeen article, reporting that the Israeli deficit has risen to 8% of the GDP (Gross Domestic Product) and, together with Ynet, criticizing the Finance Minister Bezalel Smotrich, who “acknowledged that the ongoing ‘war is the longest and most expensive war in Israel’s history’, with direct costs amounting to approximately 250 billion shekels ($66.6bln) so far”, a figure likely to increase, according to Smotrich himself. In fact, a senior official from the Ministry of Finance quoted by Yedioth Ahronoth “predicted that the government's 2024 budget would be exceeded for the third time in the coming year […] due to the lack of financial resources to cover the escalating expenses within the current budget and the delay in transferring approximately 18 billion shekels ($4.8bln) in US aid to the Israeli occupation, which had been postponed until 2024”.

From Al Mayadeen.

In this other article Al Mayadeen focuses on the surging Israeli military expenditure, with SIPRI (Stockholm International Peace Research Institute) reporting an increase in monthly spending from $1.8 billion before 7th October 2023 to approximately $4.7 billion by the end of last year, that is an increase of almost $3 billion in just 3 months! On the other hand, Israeli “economic output shrank by 5.6%, the worst performance among the 38 OECD members” within the same timeframe. In total Israel spent $27.5 billion on the military last year, corresponding to ~5.3% of its economic output, compared to about 3.4% for the US and 1.5% for Germany.

Within the same article Al Mayadeen reports that a month ago Moody’s downgraded the Israeli government’s credit rating from A2 to Baa1 - a further drop would result in Israel losing its investment-grade classification. And while “Israeli Finance Minister Bezalel Smotrich's 2025 budget projects a deficit below 4% […] Moody's expressed skepticism about these figures, predicting a 6% shortfall for the coming year”, with the former governor of Israeli central bank, Karnit Flug, warning that “the credit downgrade will increase borrowing costs, likely resulting in cuts to public services and higher taxes for Israelis”.

On top of this, a survey conducted by the Israeli Ministry of Finance's chief economist has revealed that real estate investors are already abandoning the Israeli market, with real estate deals falling by 16% this month. If “heavy investors” had a 72% share of the market back in February 2024, this number dropped to 35% in August.

From Al Mayadeen.

The Israeli-based daily business Calcalist quoted in another Al Mayadeen article has reported “a dramatic 62% increase in capital flight from ‘Israel’ since October 7, 2023”, due to “political and economic uncertainties following the formation of the extremist government led by Prime Minister Benjamin Netanyahu, Bezalel Smotrich, and Itamar Ben-Gvir”. A clear indicator of this phaenomenon is the weakening of the Israeli shekel, which “has fallen by about 10% since the new government took office and has fluctuated dramatically due to market instability”. Israeli “net financial outflows turned negative in the second quarter of 2023, with the third quarter showing a stark net outflow of $21 billion—marking a significant shift from the surplus of $1.25 billion recorded earlier”. Calcalist has also highlighted “a decline in foreign direct investment (FDI) and a sharp rise in credit default swaps (CDS), which have quadrupled since the start of the war” and “widening interest rate gaps between Israeli and US bonds […] seen as an indicator of increasing risks, as foreign investors offload government bonds, signaling a loss of faith in the regime's financial future”.

In the same Al Mayadeen article economist Jacques Bendelac was also quoted as saying that Israeli “economy could face a potential recession if the war on Gaza continues to drag on” and that “the prolonged war, combined with rising costs of living and significant disruptions in key sectors like construction, tourism, and agriculture, would exacerbate economic stagnation”.

From Al Mayadeen.

Another Al Mayadeen article focuses on the effect of flight suspensions on the Israeli aviation sector and beyond. In fact, quoting the Israeli daily business and economics newspaper Calcalist, Al Mayadeen reported that the “situation has made it increasingly difficult to export goods and import essential raw materials needed for production processes in local factories”, as the drastic reduction in the number of foreign airlines operating in the area has not only led to a sharp decline in passenger flights, but it has also severely impacted air cargo transportation, with air transport costs surging by approximately 200% over last year, “from around 3 euros ($3.26) per kilogram of goods to approximately 9 euros ($9.77)”.

Al Mayadeen also reports that the chaos in Israeli air transport is described by industry officials as unprecedented, “resulting in delays and disruptions in production and product deliveries”, which of course damages manufacturers' reputations and competitiveness and leads to loss of customers, new contracts, and revenue.

Focus on the Israeli military

From Al Mayadeen.

In addition to the economic and financial problems, the Israeli government faces mounting pressure also from within the army, although this is under-reported (if reported at all) by the Western MSM.

The Israeli outlet HaMakom quoted within another Al Mayadeen article reports about growing dissatisfactions within the Israel “Defense” Forces (IDF), with more and more soldiers “quietly refusing to return to the battlefield in the Gaza Strip”:

After 12 consecutive months of a war that goes nowhere, the soldiers are ‘black.’ In military slang, this means that they are depressed, worn out and unmotivated.

It is worth quoting a few testimonies, like the following one from the mother of a Nahal Brigade soldier:

They return to the same buildings that they cleaned, each time trapping them anew. They have been to al-Zaytoun neighborhood three times already. They understand that it is futile and pointless.

Here is another parent of a soldier from the same Nahal Brigade:

The wards are empty. Everyone who is not dead or injured is mentally damaged. There are very few left who returned to fight.

At the end of the same article Al Mayadeen reports that Israel “has officially acknowledged the killing of over 750 troops since October 2023, with more than 350 killed during the ground invasion of Gaza”, but most likely the real death toll is higher, considering that “in recent weeks, around 50 soldiers have been killed and hundreds injured, along the Lebanese border”.

From Al Mayadeen.

Speaking of casualties, just a few days ago the IDF admitted the killing of a a captain, who served as a platoon commander, and two soldiers during intense confrontations in Beit Lahia in the northern Gaza Strip, as reported by Al Mayadeen in this other article, which provides an account of the ambush by Itai Blumenthal, military correspondent for Israeli Channel Kan, as well as statistics provided by Israeli Ministry of Security, according to which “890 soldiers, officers, police, and security personnel have been killed since October 7, 2023”.

However, just tonight the Israeli opposition leader Yair Lapid questioned the official numbers and, speaking to Israeli Channel 12, exclaimed (emphasis mine):

It cannot be said that this didn’t happen. It cannot be ignored that 11,000 soldiers are injured and 890 others killed.

…and, referring to a ultra-Orthodox draft exemption law, he slammed the Israeli government for “promoting an evasion law”, stating:

With one hand Netanyahu sends soldiers who have to fight and survive on the battlefield for the defense of the homeland, with the other hand he bribes his coalition partners, in order to survive politically.

There has never been [and] never will be such a disgrace in the history of Israel. Such blatant discrimination between blood and blood. This disgrace must be stopped. We will fight this disgraceful law in the name of the fighters, in the name of the reservists, in the name of the wounded and dead, in the name of those who love this country.

…as reported by Al Mayadeen, which also mentions anti-government demonstrations in the Knesset café today demanding a captive deal. You can clearly see the cracks across the whole Israeli society.

From Al Mayadeen.

In another article Al Mayadeen reports about a letter/petition, “addressed to Prime Minister Benjamin Netanyahu, Security Minister Yoav Gallant, Chief of Staff Herzi Halevi, and government members”, signed by more than 130 Israeli soldiers and reservists to refuse service (emphasis mine):

We, the reservists and active-duty soldiers, officers, and soldiers, hereby declare that we cannot continue like this. The war in Gaza sentences our brothers and sisters, the hostages, to death.

We, who serve and have served with dedication, risking our lives, hereby declare that if the government does not change direction immediately and work to promote a deal to bring the hostages home, we will no longer be able to serve. For some of us, the red line has already been crossed; for others, it is approaching: the day is near when, with broken hearts, we will stop showing up for duty. We call on the government: sign now on a deal to save the lives of the hostages.

Of course, the generals did not like this letter and started to suspend the reservists who signed it.

From Al Mayadeen.

Then we have Maariv's military correspondent, Avi Ashkenazi, quoted in this Al Mayadeen article, describing the Israeli situation in Gaza and Lebanon as “drowning in a quagmire”. He was also quoted as saying:

The political standard in Israel did not and does not acknowledge the most important step in this war, which is to end it.

The time has come to devise a plan to end the war in Gaza and in the North.

The same Al Mayadeen article cites Ronen Bergman, Israeli security affairs analyst:

We have exaggerated by 100% regarding the strikes against Hezbollah, including major figures in the Israeli intelligence and military establishment. They've entered a state of euphoria, as if there is no shortage of ammunition and as if it doesn’t cost billions every day. We feel like everything is perfectly fine, but there are more and more reports of soldiers being killed and injured. The situation is not over, and worse, it has become routine. The Israeli military wants to resolve the situation (in Lebanon).

From Al Mayadeen.

An article published today by Al Mayadeen summarises Seth Frantzman’s analysis of the first month of war in Lebanon on the Israeli newspaper The Jerusalem Post. Here are some excerpts from the original article, as quoted by Al Mayadeen:

The challenge in southern Lebanon is that while Hezbollah has suffered blows to its command and control, the group appears to be clinging on and it is capable of continued deadly operations.

In a month of war, the rocket fire continues to average around 100-200 rockets fired by Hezbollah a day.

The same Al Mayadeen article also cites the Israeli website Srugim reporting about 8,504 wounded Israeli troops added to the Rehabilitation Division at the Ministry of Security since 7th October 2023.

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Let’s now turn to Hezbollah, which appears to be thriving despite the relentless Israeli bombings in Lebanon and the decapitation of its leadership.

Focus on Hezbollah

Hezbollah’s Media Relations Officer, Mohammad Afif - from Al Mayadeen.

Early last week, Mohammad Afif, Hezbollah’s Media Relations Officer, claimed Hezbollah’s responsibility for the drone attack that hit Benjamin Netanyahu’s residence in Caesarea on 19th October 2024 (see my article on this here, in case you missed it). Afif was quoted by Al Mayadeen as saying:

The eyes of the Resistance's fighters are watching and their ears are listening. If we did not reach you this time, we have the days, nights, and the battlefield between us.

…and he confirmed that Hezbollah, along with its control and coordination system, is in “excellent condition” (all emphasis mine):

Hezbollah's military and logistical support lines have returned to their previous state.

Iron for iron, blood for blood, and fire for fire.

On the issue of captives currently held by the enemy, I say: I know that the enemy is not committed to the ethics of war and international conventions but it bears the responsibility of preserving the lives of the captives.

What the Israeli enemy extracts from prisoners under pressure holds no value.

It won't be long before the Resistance in Lebanon takes enemy soldiers captive, and we will negotiate for their release.

There will be no negotiations [regarding a ceasefire] under fire.

Afif also stated that Israeli bombings of al-Qard al-Hassan institutions in Lebanon is not affecting Hezbollah’s finances.

Hezbollah Executive Council chief, Sayyed Hashem Safieddine - from Al Mayadeen.

A few days ago Hezbollah also confirmed the death of the head of its Executive Council, Sayyed Hashem Safieddine, considered the “number two" in Hezbollah before Nasrallah's assassination on 27th September 2024 and leading candidate for his successor. Here is the full statement from Hezbollah, as translated and reported by Al Mayadeen in this article:

We eulogize to the nation of martyrs and fighters, the nation of resistance and victory, a great leader and an esteemed martyr on the path to al-Quds, the head of Hezbollah’s Executive Council, the honorable scholar Sayyed Hashem Safieddine, may God bless his soul. He departed to his Lord, alongside the finest of his fellow fighters, content and accepted, patient and devoted, in a criminal and aggressive Zionist airstrike.

Sayyed Hashem joined his brother, our dearest and most revered martyr, Hezbollah Secretary-General Sayyed Hassan Nasrallah. He was indeed a true brother to him, standing by his side as Al-Abbas stood by Imam Hussein, peace be upon them. He was his brother, his support, the bearer of his banner, the source of his trust, and his reliance in times of hardship. He followed the path of those who fought in the Battle of Badr, defending God's religion, pious, righteous, a leader, a strategist, a commander, and a martyr.

Sayyed Hashem Safieddine dedicated his life to the service of Hezbollah, the Islamic Resistance, and its community. For many years, he responsibly and skillfully managed the Executive Council, its various institutions, and its operational units in all fields, staying close to the fighters and deeply connected to the public. He loved the families of the martyrs until God honored him with martyrdom, joining the luminous convoy of the martyrs of Karbala.

We offer our condolences to the Awaited Imam, may God hasten his reappearance, to the esteemed Leader of the Muslims, may God protect him, to the blessed religious seminaries across the Islamic world, to his fellow fighters in the Islamic Resistance, and to his honorable, patient, and devoted family. We ask God to grant them beautiful patience and the reward of this life and the hereafter.

We pledge to our great martyr and his fellow martyrs to continue on the path of resistance and jihad until we achieve its goals of freedom and victory.

Of course, tributes poured in from Palestinian Resistance factions (which you can read in this Al Mayadeen article) and from several countries across the region, such as Yemen, Iraq, Syria, and Tunisia (read this other article). Al Mayadeen dedicated two separate articles (1 and 2) for reactions coming from Iran, with the Supreme Leader of the Islamic Revolution, Ayatollah Seyyed Ali Khamenei, quoted as saying:

Martyr Safieddine's courage and sacrifice, along with that of other mujahideen of the Nasrallah axis, removed the threat of the occupation of south of Litani, Tyre, and other cities in that region.

Today, while leaders like Nasrallah and Safieddine may not appear to be present in this world, their spirit and leadership are actively present on the field defending Lebanon and its defenseless people.

By the way, Sayyed Khamenei’s Hebrew account on X, created soon after the Israeli attack against Iran, was suspended today within ~24 hours since its creation and after only 2 tweets saying:

In the name of God, the most merciful.

…and…

We will make them understand the power, capabilities, innovation, and will of the Iranian people.

…as reported today by Al Mayadeen. So much for democracy!

From Al Mayadeen.

This Al Mayadeen article summarizes a recent report from The Wall Street Journal highlighting Hezbollah’s capabilities, despite heavy Israeli strikes in Lebanon, and citing military analysts stating, according to which “the Lebanese group's units have trained to operate with a certain degree of independence. This makes it easier for them to continue fighting even when senior leaders are martyred and internal communications are disrupted”.

Another Al Mayadeen article provides a summary of an op-ed published in The Washington Post, focussing on the Israeli ground invasion of Lebanon and how Hezbollah has prevented the IDF “from advancing no more than four or five kilometers into Lebanese territories”, citing an IOF official describing Hezbollah as a “formidable foe” and “emphasizing the Resistance fighters' skills and competence on the battlefield”.

By the way, just a couple of days ago Al Mayadeen reported that Hezbollah for the first time issued an evacuation orders for northern Israeli settlers, following a similar procedure of the Israeli military - here is the evacuation order that Hezbollah issued for 25 settlements:

You are requested to evacuate immediately. Your settlements have become a place of deployment and settlement for the enemy military forces attacking Lebanon. As a result, they have become legitimate military targets for the air and missile forces of the Islamic Resistance.

…and tonight Al Mayadeen in its Short News has quoted Islamic Resistance Operations Room as stating:

The past few days have witnessed a noticeable intensification in the daily operations of the Islamic Resistance.

In the ground confrontations, the vicinity and some neighborhoods of the front villages witnessed attempts by the enemy to advance.

The enemy army was unable to fully control or occupy any village on the forward edge.

During the past four days, the missile force carried out 103 launches at a depth of 145 km.

In about a month, the air force launched 150 drones of various types and sizes.

During the past four days, the air force carried out 30 drone launches.

Within 4 days, the Air Defense Unit carried out 5 surface-to-air missile launches on Israeli aircraft.

The air force continues to launch drones to a depth of 145 km, all the way to the southern suburbs of Tel Aviv.

Since the beginning of the ground confrontations, 90 Israeli officers and soldiers were killed and more than 750 were wounded, according to what we monitored.

During the ground confrontations, we destroyed 38 Merkava tanks, 4 military bulldozers, a Humvee, an armored vehicle, and an armored personnel carrier.

Since the start of the ground confrontations, 3 Hermes 450 drones and one Hermes 900 drone have been downed.

This tally excludes the Israeli enemy's losses in military bases, sites, barracks, and settlements.

Can you see the difference with the statements from Israeli soldiers, officers and war correspondents?

Al Mayadeen in its Short News today has also quoted Lebanese MP Ali Fayyad as saying (all emphasis mine):

The Resistance, for the sake of maintaining deterrent balance, has engaged in a practice completely similar to what the Israeli enemy is doing.

The coming days will witness further restoration of deterrence equations in the face of the Zionist enemy.

The Resistance deployed ballistic missiles at various stages, without using up its strategic stockpile.

We, as part of Hezbollah’s political team, are now taking action according to daily directives issued by the leadership.

Our society is steadfast and firm in its choices and is increasingly rallying around the Resistance.

Although I have not been able to find any recent poll/survey about the popularity and support for Hezbollah across Lebanon, I believe that these may have increased significantly within the last month or so, especially if you consider that former Hezbollah’s leader, Sayyed Hassan Nasrallah, was mourned by all Lebanese parties (see this Al Mayadeen article) and even by the Maronite Patriarch, Bechara al-Rai, who, in the first homily after Nasrallah’s assassination, stated:

The martyrdom of Hassan Nasrallah reopens wounds in the hearts of the Lebanese.

This was very significant because Bechara al-Rai “often sharply criticized the ‘front of support for Gaza’ opened by Hezbollah in southern Lebanon”, as reported by L’Orient Today, thus depicting quite a different picture of Lebanon compared to Israel.

By the way, just a few days ago, Hezbollah fighters wrote the following letter to the people of Lebanon, expressing “their gratitude for the unwavering support and prayers of the community” and promising victory over the enemy:

To the most honorable, noble, and purest of people, 
The heartbeats of our heart — our ever-loyal family

From your sons in the Islamic Resistance:

Permission [to fight] is given to those [believers] who are fought against, because they have been wronged; and surely, Allah is capable of granting them victory
[They are] those who have been unjustly evicted from their homes without right - only because they say, "Our Lord is Allah.
Surat Al-Hajj:39-40

Our dearest and beloved ones,
From beneath every tree, beside every rock,
From every valley, hill, and mountain,
From the depths of every fighter’s heart,
Thank you for your prayers and greetings; they were for us a source of coolness and peace
Thank you to every mother, father, brother, sister, child, and elder
~
To our honorable and noble family,
We heard your greetings and you heartfelt and sincere words,
That only strengthen our determination and will,
From the land of resistance and sacrifice,
We want to assure you that victory is nothing but a matter of patience
~
Peace be upon you, O people of resistance and honor,
You, the most honorable, the purest, and the kindest of people,
You are the resistance, you are the sacred responsibility left by our most sacred martyr,
His Eminence Sayyid Hassan Nasrallah, may God be pleased with him,
This responsibility is upon all of our shoulders, no matter the sacrifices,
As for your inquiries about us, rest assured,
We are in the best of conditions, praise be to God
We are like the mountains you well know,
Upon whose soil we burn and crush the tanks and soldiers of the enemy,
We are Badr, we are Nasr, we are Ridwan, and we are Aziz
From the depths of my heart, I send this message to our precious and honorable people,
The noblest and most dignified of people, in the name of all the fighters,
Who hear your voices and messages,
Your elevated and gracious spirits,
And this is something we have grown familiar with since the beginning of the resistance,
May God reward you, grant you patience, and help you endure a little longer,
And God willing, we will reunite in town squares
With each victory, may you be in the best of conditions, God willing
~
To the beloved of the martyred Sayyid,
By the blood of every martyr and the suffering of every wounded soul,
By your patience and your sacrifices,
We swear that this banner in our hands will never fall,
Between us and the enemy are both time and the field of the battle,
And between us and you, God willing, is the promised victory,

Peace be upon you,
And may God’s victory and blessings be upon you, 

The fighters of the Islamic Resistance

Video and text from this post on the Telegram channel of Hezbollah Operations.
A slightly different version of the letter can be found also on this Al Mayadeen article.

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P.S.: On a very final note, Israeli lawmakers have voted tonight to ban UNRWA (United Nations Relief and Works Agency for Palestine Refugees in the Near East) from conducting operating inside Israel. In a second vote, they also voted to sever diplomatic ties with UNRWA and designate it a terror organisation - see for instance this snippet from The Guardian.