Lapid: If talks with Palestinians collapse, economy will be battered

“If the negotiations with the Palestinians get stuck or break down and we enter a reality of a European boycott, even a very partial one, Israel’s economy will retreat,” Lapid said in an address to the Institute for National Security Studies conference in Tel Aviv. He added that according to a special report he had commissioned, “Every resident of Israel will get hit straight in the pocket; the cost of living will rise, the education, health, welfare and defense budgets will be cut, and many international markets will be closed to us.”

The finance minister said: “Europe is our primary trade market. Thirty-three percent of Israeli trade is with the EU. If there is no diplomatic agreement and we face a middle-range scenario – and there are more serious ones – that there is only a 20 percent drop in exports to the EU and direct investment from the EU stops, then exports will drop by some 20 billion shekels ($5.74 billion) annually, the GDP will drop some 11 billion shekels, and 9,800 people will be fired immediately. Just canceling the ‘association agreement’ with the EU, a prospect we know that as far as they’re concerned is already on the table, will harm exports to the tune of 3.5 billion shekels a year, reduce GDP by 1.5 billion shekels annually, and lead to the dismissal of 1,400 workers.” The association agreement incorporates various free trade and concessionary arrangements for industrial and agricultural trade between Israel and Europe.

According to Lapid, Europe will be just the beginning. “It’s hard to envision a situation in which Europe won’t end up being an indicator for the rest of the world. If Chinese or Indian or Japanese companies come to believe that because of Israel they will lose their big markets in Europe, they won’t hesitate for a moment before joining the sanctions so as not to lose business.”

Lapid said it’s not possible “to conduct a discussion of Israeli security without discussing the Israeli economy. These are not separate issues, but two sides of the same issue. Everything’s connected.”

Referring to the special report that was prepared by the treasury’s chief economist, Dr. Michael Sarel, Lapid said, “We could decide that we’re just going to ignore all this. Maybe we should ignore it, because Europe is mistaken. It’s mistaken on a practical level, because we will never compromise on our security interests and it doesn’t matter what kind of pressure they try to exert on us; and it is mistaken on a moral level, because a world in which they are trying to reconcile with the horrific regimes of Iran and Hamas that hate women, murder homosexuals, and suppress human rights, but impose sanctions on us just because we’re the only orderly democracy in the Middle East – is a world gone mad.”

But according to Lapid, the right approach is not to ignore the boycott threats, but to fight them. “We cannot sit idly by and accept possible boycotts; we have to mount an information campaign of our own. But let’s not kid ourselves – the world listens to us less and less. We have to recognize that if the talks fail and the world believes that they failed because of us, there will be a price and it’s worth knowing what the price will be. There’s an economic threat here, and it’s my job to give you the economic intelligence information.”

Addressing Economy Minister Naftali Bennett’s claims that a Palestinian state would crush the Israeli economy, Lapid said that Bennett’s remarks “don’t hold up to any professional examination that we’ve conducted in the treasury.”