The Economists' Forum, which includes senior economists from the former public sector and academia, released a letter today (Sunday) warning of significant damage to the Israeli economy in the event of European sanctions. The letter also highlights an expected rise in the cost of living and greater difficulty in doing business in Israel, developments attributed to the spread of Jewish terrorism and intensifying construction in the settlements, particularly in the "E1" area east of Jerusalem.
"Britain recently announced its intention to ban imports from the settlements and is considering sanctions against companies and individuals that provide construction, infrastructure, financial, or real estate services to facilitate their expansion," the letter states. "In the Netherlands, a new ban on bringing in products from the settlements has come into effect, applying even to travelers arriving with such items. France and Canada have also announced their intention to implement a ban on the import of settlement products, and other European nations are considering similar measures. In the United States, Democratic senators have initiated a bill that would impose sanctions on parties involved in construction within the E1 area. Furthermore, the UN has expanded its ‘blacklist’ of companies linked to the settlements, a list that includes, for instance, all Israeli banks as well Tnuva. This is in addition to an ‘atmosphere of boycott’ that is already taking a toll on academia, sports, and even defense procurement."
In their letter, the economists express grave concern over a "significant deterioration in economic relations between Israel and Europe, which would result in substantial macroeconomic damage." The emerging risk is the expansion of economic sanctions to include construction and infrastructure firms, as well as banks, insurance companies, and financial entities that provide services for activities within the settlements. "Unlike a physical product, the origin of which can be identified, credit systems, payment mechanisms, insurance, and supply chains are integrated into the whole Israeli economy."
Fear of a "chilling effect"
Furthermore, the forum expresses fears of a "chilling effect," whereby "banks, retailers, and multinational corporations abroad might curtail their ties with Israeli companies, even when there is no certainty that those companies are linked to the settlements, simply to avoid legal and regulatory risks. The damage to the Israeli economy could escalate by orders of magnitude if such measures were to spread from a few individual countries to a significant portion of Europe, and if they were to extend beyond the settlements to the Israeli economy as a whole."
In addition to the impairment of business operations, the economists who signed the letter warn of "a further, significant rise in the cost of living. This is a well-documented pattern observed internationally following the imposition of sanctions. While the cost-of-living issue is already all too familiar to the residents of Israel, the situation would deteriorate even further as a result of such sanctions." They point to the recent rise in food prices, though it is questionable whether this is linked to any sanctions. According to them, the reason is clear: "The expansion of settlements in the West Bank, and the failure to prevent Jewish violence and terrorism against Palestinians, cause diplomatic damage to Israel, lead to its international isolation, and entail a heavy economic cost that will be borne by all the country's residents. This damage must be prevented now, while it is still possible."
The signatories
The letter is signed by dozens of senior economists, among them Yair Avidan, former Supervisor of Banks; Prof. Zvi Eckstein of Reichman University, and a former deputy governor of the Bank of Israel; Yarom Ariav, former Director General of the Ministry of Finance; David Boas, former budget commissioner in the Ministry of Finance; Prof. Avraham Ben-Bassat of the Hebrew University, former director general of the Ministry of Finance; David Brodet, former director general of the Ministry of Finance; Prof. Manuel Trajtenberg of Tel Aviv University, former chairman of the National Economic Council; Prof. Leo Leiderman of Tel Aviv University, former head of the Research Department at the Bank of Israel; Prof. Michel Strawczynski of the Hebrew University, former head of the Research Department at the Bank of Israel; Prof. Avia Spivak of Ben-Gurion University, former deputy governor of the Bank of Israel; Prof. Jacob Frenkel of Tel Aviv University, an Israel Prize laureate and former governor of the Bank of Israel; Haim Shani, founder and managing partner at Israel Growth Partners and former director general of the Ministry of Finance; and Prof. Oded Sarig of Reichman University, former Commissioner of Capital Markets, Insurance and Savings.
Published by Globes, Israel business news - en.globes.co.il - on October 18, 2026.
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