Netanyahu won’t budge on war despite protests; UK sparks diplomatic row by halting arms licences to Israel

Prime Minister Keir Starmer’s government drew criticism from Israel and the UK’s Chief Rabbi over its decision to suspend some arms licences due to concerns the use of British components in Gaza risked violating international humanitarian law.

Israel’s finance minister said higher war spending would be financed through budget cuts, salary freezes and increased revenues rather than a wider deficit, as he outlined a long-delayed fiscal plan for next year. 

Netanyahu won’t budge on war despite protests over hostage deaths

Israeli Prime Minister Benjamin Netanyahu is sticking to his hardline approach on Hamas, in the face of mass protests at home over the killing of six hostages.

A general strike called by the main labour union on Monday — joined by major companies and small businesses — triggered a day of chaos as protesters blamed Netanyahu for allowing the hostages to die at the hands of their captors. That came as the US pushed Israel’s leader to agree to a ceasefire with the Palestinian militant group.

Israeli businesses resumed trading as normal on Tuesday, with the nation taking a pause from rallies after the funerals of the slain hostages.

The demonstrators were calling on the government to give more ground in truce talks with Iran-backed Hamas, so a deal could be struck to bring home the roughly 100 remaining abductees and pause a war that’s raged for almost 11 months.

Defence Minister Yoav Gallant shares that view, and many senior military figures say Israel has weakened Hamas sufficiently to pull forces from the border between Gaza and Egypt. That would allow an exchange of hostages for Palestinian prisoners in an initial phase of a wider agreement.

Read more: A small Gaza corridor turns into new Israel-Hamas sticking point

But in a highly charged televised speech on Monday night, Netanyahu said the 14km border area, known as the Philadelphi Corridor, was the key supply route for Hamas and thus should never be abandoned. To do so, he said, would increase the threat of an attack on Israel similar to the 7 October invasion that triggered the conflict.

One barrier to a ceasefire deal is that Israel says it needs to retain the right to restart fighting to achieve its aim of destroying the group. Hamas has said any accord should amount to a permanent end to the conflict.

Diaspora Affairs Minister Amichai Chikli, a member of Netanyahu’s Likud Party, said in a phone interview that the murder of the six hostages found over the weekend “changed the situation with Hamas”.

“Some are saying, ‘Let’s surrender and give up the Philadelphi Corridor’,” he said. “We are saying we will never surrender. If before we were willing to have a reduced presence, that’s no longer the case.”

Egypt and Hamas, designated a terrorist organisation by the US, say they’ll never accept an Israeli military presence in the area.

Read more: Israel-Hamas truce deal is stuck on a fence: Balance of Power

Netanyahu said in his speech that Israel’s military was examining options to hit back harder at Hamas to avenge the hostage deaths. Chikli said he and several other ministers favoured taking a few kilometres of land from northern Gaza as payback. While unlikely to be taken up, that plan would prove highly controversial with the US and other allies.

Hamas has also hardened its stance. Israeli military pressure to free hostages “will mean they will return to their families inside coffins”, the group said in a statement. “New instructions were issued to the militants assigned to guard the prisoners if the occupation army approaches their place of detention.”

Hamas published a video showing brief statements by each of the six dead hostages. It wasn’t clear when the clips had been recorded but the move deepened the sense of grief felt by many Israelis. Some of the six were on the list of hostages expected to be released in the first phase of a deal brokered by the US, Egypt and Qatar, which has been stalled for several months.

US President Joe Biden said on Monday that a truce was getting closer, though when asked by a reporter if Netanyahu was doing enough to free hostages, he said simply, “No.” Asked when he’d speak to the Israeli leader, he said, “Eventually.”

On Tuesday, White House spokesperson John Kirby declined to expand on Biden’s criticism of Netanyahu, telling reporters that “the president himself is personally involved” in work “on a proposal that will secure the release of the remaining hostages and will include massive and immediate relief for the people of Gaza and also result in a stoppage of the fighting”.

Kirby said, “The killing over the weekend just underscores the sense of urgency that we have to have.” Asked whether this would be a”‘final proposal”, Kirby said: “I’m not using that phrase.”

The US has stood firmly by Israel in its war against Hamas in Gaza, which began when thousands of Hamas operatives swarmed across the border, killing 1,200 people and abducting 250. Israel’s counter-attack has killed more than 40,000 Palestinians, according to health officials in Hamas-run Gaza, which don’t distinguish between civilians and fighters.

Much of Gaza has been reduced to rubble, with many of its more than two million residents forced into tented camps and suffering from hunger, poor hygiene and illness. This week, a massive polio vaccination campaign is under way to stem the disease, which broke out due to poor conditions.

UK sparks diplomatic row by halting some arms licences to Israel

Prime Minister Keir Starmer’s government drew criticism from Israel and the UK’s Chief Rabbi over its decision to suspend some arms licences due to concerns the use of British components in Gaza risked violating international humanitarian law.

Foreign Secretary David Lammy on Monday told the House of Commons that Britain would suspend some 30 of the UK’s 350-odd export licences to Israel, covering components used in F-16 fighter aircraft, helicopters, drones and naval systems, as well as items that facilitate ground targeting. He didn’t announce the duration of the suspension, saying only ministers would keep the matter under review.

“The assessment I have received leaves me unable to conclude anything other than that for certain UK arms exports to Israel, there does exist a clear risk that they might be used to commit or facilitate a serious violation of international humanitarian law,” he said.

The decision by the Labour government — in power for just two months — opens it up to criticism both by supporters of Israel, who say Britain is pulling support from a key ally of the West and a bastion of democracy in the Middle East — and by critics of Israel’s military action in Gaza, who say the suspension of about 10% of licences doesn’t go far enough.

Netanyahu’s office called the UK decision “shameful,” pointing out that Hamas was still holding more than 100 hostages — including five Britons — 11 months after its terrorist attack on Israel sparked the current conflict. Defense Minister Gallant said he was “deeply disheartened” by the move.

Phil Rosenberg, president of the Board of Deputies of British Jews, told the BBC it sent a “terrible, terrible message” to announce the move while Israel was still reeling from the deaths of six hostages held by Hamas. UK Chief Rabbi Ephraim Mirvis, meanwhile, said the decision “beggars belief” and warned the announcement “will serve to encourage our shared enemies”.

Lammy’s decision — communicated to the US administration on Sunday — followed a review of the UK arms export regime, which grants permits to defence firms making military equipment for Israel. The UK government is not among countries like the US in sending weapons to Israel directly.

The foreign secretary said the suspension doesn’t amount to an arms embargo and would not have a material impact on Israel’s security. He added that the government had not and could not arbitrate on whether or not Israel had breached international humanitarian law.

Israeli finance minister commits to cutbacks to help fund war

Israel’s finance minister said higher war spending would be financed through budget cuts, salary freezes and increased revenues rather than a wider deficit, as he outlined a long-delayed fiscal plan for next year.

The target fiscal gap for 2025 would be reduced to 4% of gross domestic product, Bezalel Smotrich said, requiring budgetary adjustments of at least 35 billion shekels ($9.5-billion).

Speaking to journalists in Jerusalem on Tuesday, he declined to give full details, saying he still needs to present his plans to Netanyahu and other ministers. Still, he cited the need for substantial cuts in the public sector and pay freezes for ministers, politicians and state employees.

The war against Hamas in Gaza and hostilities with Hezbollah, a Lebanese militant group, have caused Israel’s expenditure to soar and strained the economy. Israel’s 12-month trailing deficit rose to 8.1% of gross domestic product as of July and the government’s suffered its first-ever ratings downgrades.

Smotrich reiterated the government’s plan to get the deficit to 6.6% for 2024 as a whole, though that would still be one of the widest gaps Israel has recorded this century.

The 2025 budget will be approved in Israel’s parliament by the end of the year, Smotrich said, a deadline technocrats have warned is unrealistic given the structural work still necessary and the lengthy legislation process. Delays have unnerved investors and business leaders, who have warned a hiatus will cloud Israel’s economic prospects and elevate the already-high risk premium on its assets.

Smotrich said Israel could hit its budget goals for this year unless there were unexpected expenses from the conflict against Hamas or the skirmishes against Hezbollah worsened.

Tel Aviv’s main stock index extended losses after Smotrich spoke. It was down by 1.5% as of 5.30pm local time.

Smotrich said the finance ministry’s growth projection for 2024 of 1.9% “will likely be lowered soon”. Citigroup analysts were forecasting a figure of 1.4%.

Asked whether the government would continue allocating controversial political budgets to be spent at the discretion of coalition party leaders, Smotrich said they should be as low as possible. Those funds, which amounted to some six billion shekels this year, have stirred public rage as large portions are spent on religious schools and settlements in the Palestinian territory of the West Bank. DM

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