Israeli Government's Last-Minute Legislative Blitz Costs Tens of Billions and Risks Long-Term Economic Harm

As the 25th Knesset prepares to dissolve on July 17, the Israeli government and coalition are rushing to pass a series of last-minute laws and budget reallocations, incurring tens of billions of shekels in costs. The Ministry of Finance warns that key legislation, including the Basic Law on Torah Study and the repeal of the kosher certification reform, will have severe economic and social consequences. The Basic Law on Torah Study, passed in a limited form, could expand economic benefits for those studying Torah instead of serving in the military, potentially reducing ultra-Orthodox integration into the workforce and increasing the burden on those who do serve. The Finance Ministry estimates that each month of reserve military service costs the economy about 50 million shekels in lost productivity, with total losses reaching 170 billion shekels from 2023 to 2026, alongside direct state payments of 115 billion shekels for reservists through the end of the year.

Simultaneously, the Knesset approved the cancellation of the kosher reform initiated by the previous government, which aimed to break the Chief Rabbinate's monopoly by allowing private kosher certification bodies. The repeal is expected to cost the public approximately 750 million shekels annually, including 150 million for employing up to 5,000 kosher supervisors and 600 million in additional costs passed on to consumers. Other controversial laws include freezing enforcement against ultra-Orthodox draft dodgers until November 30 and extending mandatory military service to 32 months, the latter supported by the Finance Ministry despite potential delays in workforce entry.

Institutional weakening is also underway, with legislation diminishing the authority of the Attorney General and expanding gender segregation in academia, potentially harming Israel's medical training and higher education quality. The government also passed a media reform law reducing content providers' investment obligations, which critics say will increase market concentration and benefit coalition-aligned media entities.

In parallel with legislative efforts, the government has executed rapid budget transfers totaling hundreds of millions of shekels to politically favored sectors, including the Arab sector, ultra-Orthodox private kindergartens, and local authorities, sometimes bypassing legal advisory protocols. Meanwhile, significant consumer-friendly reforms, such as metropolitan transportation improvements and a business credit data repository, have been shelved due to coalition opposition, primarily from ultra-Orthodox parties.

Experts from the Israeli Democracy Institute warn that this legislative blitz weakens democratic institutions, undermines the rule of law, and perpetuates inequality in national service burdens. Moody's credit rating agency has cautioned that such institutional damage could lead to a downgrade, increasing borrowing costs and reducing funds available for public services. The long-term economic risks include a potential 15% drop in GDP without increased ultra-Orthodox employment and a 16% rise in direct taxes by 2065 to maintain current public services. The combination of weakened institutions, shrinking civil budgets, and capital flight poses a significant threat to Israel's human capital-based economy.