Israel’s Economic and Political Outlook

According to Prime Minister Benjamin Netanyahu, “Israel is the epicenter of world innovation” because it nurtures entrepreneurship as well as science and technology. To foster innovation, a nation must maintain a budget surplus and establish favorable macroeconomic conditions. In 2003, Israel’s economy was contracting, inflation was high, unemployment was at 11% and one of the country’s major banks was on the verge of collapse. Netanyahu, then finance minister, saw that the public sector had grown too large and was suffocating the private sector. To redress this imbalance, the government cut public spending, reduced taxes and promoted competition. More recently, Israel passed legislation...