Israel’s permanent war economy: Who pays the cost of ‘Super-Sparta’?

Jerusalem: The conflicts that began after Hamas’ October 7, 2023 attack on Israel have become one of the most expensive periods in the country's history.

According to figures presented by Bank of Israel Governor Amir Yaron, the combined cost of military operations had reached approximately 405 billion shekels ($138 billion) by April 2026.

The military campaign against Iran alone reportedly added another 35 billion shekels ($12 billion) in expenditure before a ceasefire came into effect in April. As a result, Israel's defence budget has more than doubled compared to pre-war levels.

Defence spending vs public services

The rapid expansion of military spending has intensified concerns about its impact on social sectors. Economists argue that continued budget reallocations towards defence may leave fewer resources available for education, healthcare, infrastructure and welfare programmes.

Professor Esteban Klor described the situation as Israelis "paying twice" for the conflict — first through reductions in public spending and second through slower economic productivity.

Analysts warn that repeated budget cuts could gradually affect the quality of schools, hospitals and public infrastructure, creating long-term challenges beyond the battlefield.

To finance military operations, Israel has relied heavily on borrowing from international markets. Public debt has reportedly risen from around 60 per cent of GDP before the war to more than 69 per cent.

At the same time, citizens are facing higher taxes and increased social security contributions. While the Israeli economy has shown resilience and continues to grow, economists caution that rising debt levels could place additional pressure on future government finances.

The hidden economic impact of mobilisation

Another challenge comes from the prolonged mobilisation of reservists. Tens of thousands of Israelis have spent extended periods in military service since October 2023, reducing workforce participation across multiple sectors.

A recent survey by the Israel Democracy Institute found that nearly one-third of respondents reported a decline in wages or income since the war began. Self-employed workers and lower-income households have been among the hardest hit.

Netanyahu’s vision of a ‘super-Sparta’

Prime Minister Benjamin Netanyahu has repeatedly argued that Israel must become more militarily self-reliant. In 2025, he described the country as needing to evolve into a "super-Sparta" — a reference to the ancient Greek state known for its military focus.

The government has announced plans to invest around 350 billion shekels over the next decade in Israel’s defence industry, with the goal of strengthening domestic military capabilities and reducing reliance on foreign military aid.

Supporters argue that the investment is necessary given regional security threats. Critics, however, fear that a permanent expansion of defence spending could reshape national priorities for years to come.

Rising inequality adds to concerns

The economic pressures are also being felt unevenly across society. Recent data from the Israeli National Insurance Institute showed that child poverty increased between 2023 and 2024, highlighting concerns that vulnerable communities may bear a disproportionate share of the economic burden.

Economists have warned that if defence spending continues to rise while social investment stagnates, existing inequalities could deepen further.

The growing discussion inside Israel is no longer limited to military strategy. Increasingly, it centres on how much of the country's resources should be devoted to security versus economic development and public welfare.

While supporters of the government's approach argue that security remains the foundation of national survival, critics warn that a prolonged state of conflict could leave lasting consequences for education, healthcare, public finances and living standards.

As Israel continues to navigate regional tensions, the debate over balancing security needs with economic sustainability is becoming one of the country's most significant domestic challenges.