Michael Sarel, who recently stepped down as chief economist at Israel’s Treasury Ministry, speaks about the challenges facing Israel’s economy, the political roadblocks that prevent improvements, and the dangers of over-regulation. (Interview by Amnon Lord and Akiva Bigman)

The populism contest [among politicians] is the primary obstacle to a fundamental improvement in Israel’s economic situation. According to Dr. Sarel, since the days of Netanyahu’s reforms in 2003-2005 when he served as Treasury Minister, Israel has not had an economic policy that deals with fundamentally changing the situation but only one dealing with the symptoms of the present one. “Very often, there are very attractive ideas which ostensibly deal with the problems in the economy,” he says, “and they have good visibility. On the macro level they seem to solve the problems, but when you properly examine these cures, you understand that the negative results are greater than the positive ones.”

Early Friday morning, Israel attacked military installations near the Iranian cities of Isfahan and nearby Natanz, the latter being one of the hubs of the country’s nuclear program. Jerusalem is not taking credit for the attack, and none of the details are too certain, but it seems that the attack involved multiple drones, likely launched from within Iran, as well as one or more missiles fired from Syrian or Iraqi airspace. Strikes on Syrian radar systems shortly beforehand probably helped make the attack possible, and there were reportedly strikes on Iraq as well.

Iran itself is downplaying the attack, but the S-300 air-defense batteries in Isfahan appear to have been destroyed or damaged. This is a sophisticated Russian-made system positioned to protect the Natanz nuclear installation. In other words, Israel has demonstrated that Iran’s best technology can’t protect the country’s skies from the IDF. As Yossi Kuperwasser puts it, the attack, combined with the response to the assault on April 13,

clarified to the Iranians that whereas we [Israelis] are not as vulnerable as they thought, they are more vulnerable than they thought. They have difficulty hitting us, but we have no difficulty hitting them.

Nobody knows exactly how the operation was carried out. . . . It is good that a question mark hovers over . . . what exactly Israel did. Let’s keep them wondering. It is good for deniability and good for keeping the enemy uncertain.

The fact that we chose targets that were in the vicinity of a major nuclear facility but were linked to the Iranian missile and air forces was a good message. It communicated that we can reach other targets as well but, as we don’t want escalation, we chose targets nearby that were involved in the attack against Israel. I think it sends the message that if we want to, we can send a stronger message. Israel is not seeking escalation at the moment.