Just over a year ago, Israeli Prime Minister Benjamin Netanyahu outlined a vision for Israel to transform into a “super-Sparta,” invoking the ancient Greek city-state known for its military focus and readiness. Although the remarks sparked immediate controversy and market unease, Netanyahu has since pursued policies that align closely with this militarized framework, without explicitly using the term again.

Central to this approach is Israel’s defense budget, which remains among the world’s highest relative to gross domestic product (GDP). For 2026, defense spending is projected to account for about 7.8 percent of GDP, only slightly lower than peak wartime years in 2024 and 2025. Netanyahu is reportedly seeking to reopen the state budget to add an additional 40 billion shekels ($13 billion) to the current defense allocation of 143 billion shekels. Defense spending is expected to stay elevated for the foreseeable future, potentially increasing by 350 to 400 billion shekels over the coming decade.

The defense sector itself is expanding beyond its traditional advanced electronics focus into more basic munitions manufacturing as Israel aims to reduce reliance on imports. Elbit Systems, the country’s largest defense contractor, saw its order backlog more than double to $32 billion by mid-2026, while Israel Aerospace Industries experienced a 2.2-fold increase to $35 billion. Defense exports remain strong, even attracting significant contracts in Europe despite political sensitivities, although expansion into lower-tech products may yield limited economic benefits and fewer high-productivity jobs.

While Israel’s growing military posture supports the economy in some respects, it imposes significant trade-offs commonly summarized as the “guns versus butter” dilemma, referring to the tension between military and civilian spending. Israel has so far avoided the worst consequences due to low pre-war debt, robust tax revenues, and generous U.S. financial aid during peak conflict periods. Nonetheless, economic challenges are mounting.

The Bank of Israel estimates direct economic losses from ongoing conflict at approximately 175 billion shekels, or 8.6 percent of annual GDP, during the first two years, a trend continuing into 2026. Emigration, particularly among skilled professionals such as engineers, doctors, and academics, has increased, reaching an estimated average of 90,000 annually from 2023 to 2025 compared to 60,000 in the previous decade. This demographic shift raises concerns about the future of Israel’s civilian and intellectual capital.

Education outcomes also raise alarm. Israeli students have underperformed in international assessments over recent years, with declines accelerating during the period of conflict. The latest PISA tests reveal particularly low proficiency in computational problem-solving and critical evaluation of information, including vulnerability to misinformation. Contributing factors include frequent school closures, teacher shortages, and political debates over educational content, which in some cases emphasize nationalist over academic values.

Netanyahu has acknowledged the desire for Israel to remain both “Athens” and “Sparta,” symbolizing a balance between military strength and cultural, academic vitality. However, experts suggest maintaining this dual identity presents substantial challenges. Sustaining high defense expenditures without sharply cutting civilian programs or increasing taxes could push national debt beyond 80 percent of GDP, potentially slowing growth and exacerbating emigration trends. Moreover, deepening militarization may strain Israel’s cultural and academic ties internationally.

Despite the expansive vision for a militarily dominant Israel, analysts question its long-term viability. The defense sector cannot fully meet all military supply needs domestically, as evidenced by recent high-value arms acquisitions abroad. Additionally, extended reserve duty requirements risk economic and social disruption. Compounding these issues, Netanyahu’s government has faced criticism for exempting the Haredi minority from military service and allocating significant resources to support their distinct educational system, which some argue undermines broader national economic goals.

With general elections looming, key debates focus on accountability for the October 7 attacks, the future of Israeli democracy, and the integration of the Haredi community into national service. Voters are also confronted with a broader choice about the country’s direction—whether to continue on a path toward Netanyahu’s “super-Sparta” and its associated costs or to pursue alternative models balancing security with civic and economic development.