Days before Tuesday’s crucial elections in Israel, Prime Minister Benjamin Netanyahu shocked his country by offering bleak economic forecasts that critics say could push Israel closer to Iran, Russia and North Korea.
Mr. Netanyahu told an Israeli financial journalist on Friday that he was preparing for international sanctions against Israeli banks by drawing up plans for a “bypass economy” based on cryptocurrencies. He also asked Israelis to prepare for the end of billions of dollars in annual U.S. aid.
“It’s over,” he said. “It’s just a matter of time.”
The comments reflect Israel’s growing isolation around the world, with even its once-staunch allies imposing or threatening economic sanctions and embargoes after years of war in Gaza and endemic violence by Jewish settlers against Palestinians in the occupied West Bank.
As settlers advance into previously off-limits areas, Britain last month denounced what it called “ethnic cleansing” and announced trade sanctions on the settlements that it said would also apply to entities that financed their construction. Although Israel’s banking system was not directly targeted by the sanctions, a dozen countries, including Canada, France and Spain, said they supported restrictions on trade with the settlements, raising the prospect of additional sanctions that could affect Israeli financial institutions.
Opponents of Mr Netanyahu’s government have decried his statements, which have also drawn rebukes from the generally reserved central bank.
“Cryptocurrencies cannot be used as a means to circumvent sanctions against Israel,” the Bank of Israel said in a statement. The bank added that the government would do better to “focus on preventing sanctions” and preserving Israel’s economic ties with its main trading partners.
Commentators said Mr. Netanyahu’s prospects seemed apocalyptic, and some said they were part of a fear-mongering campaign aimed at improving his electoral prospects.
Last year, amid growing global condemnation of the Israeli military’s conduct of the war against Hamas in Gaza, where it has been accused of war crimes, and the imposition of some arms embargoes, he warned that Israel should become a more self-sufficient “super-Sparta.” This reference to the ancient island Greek city-state that practiced militaristic self-rule was, in the eyes of critics, a frightening scenario for a small country whose economy is largely driven by a technology sector dependent on foreign investment.
Gadi Eisenkot, Mr. Netanyahu’s main rival in Tuesday’s election, said in a social media post that the prime minister’s “Bibi-coin vision,” a nod to cryptocurrency, would “dismantle the Israeli economy for generations.”
“No Internet shopping, no investment in high technology, no national security,” he added.
Yair Lapid, the opposition leader who has served as prime minister and finance minister, wrote on social media that a vote for Mr. Netanyahu was a vote for “a crumbling economy, sanctions that will lead to insane price hikes and no military alliance with the United States.”
And a former governor of the Bank of Israel, Jacob Frenkel, told Israel’s Channel 12 on Sunday that walking away from the international financial system would turn Israel into a “leper.”
Mr. Netanyahu then backtracked slightly, saying he had heard the criticism and that cryptocurrency was only an option to deal with possible financial sanctions.
In a somewhat shocking contrast, Mr Netanyahu’s campaign has argued that the Israeli economy as a whole is healthy despite years of war, helped by record export earnings, relatively low inflation and unemployment and a strong shekel.
But many Israelis don’t feel it. The State Comptroller, a government watchdog, warned last year that the cost of living was “skyrocketing,” in part because of structural challenges in Israel’s consumer market and low levels of competition.
While foreign affairs and national security dominated the political debate ahead of the election, a recent survey by the Israel Democracy Institute, a nonpartisan research group, found that the economy was the top issue for many voters heading into Tuesday.
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