Days before Tuesday\u2019s pivotal Israeli election, Prime Minister Benjamin Netanyahu shocked his country by offering a bleak economic forecast that critics said could make Israel more like Iran, Russia and North Korea.<\/p>\n
Mr. Netanyahu told an Israeli financial journalist on Friday that he was preparing for international sanctions against Israeli banks by drawing up plans for a \u201cbypass economy\u201d based on cryptocurrency. He also told Israelis to prepare for the end of billions of dollars of annual American assistance. <\/p>\n
\u201cIt\u2019s over,\u201d he said. \u201cIt\u2019s only a matter of time.\u201d<\/p>\n
The comments were a reflection of Israel\u2019s deepening global isolation, with even once-staunch allies imposing or threatening economic sanctions and embargoes after years of war in Gaza and rampant violence by Jewish settlers against Palestinians<\/a> in the occupied West Bank.<\/p>\n With settlers advancing into areas that were previously off limits, Britain last month decried what it called \u201cethnic cleansing\u201d and announced trade sanctions<\/a> on settlements that it said would also apply to entities that financed their construction. Though Israel\u2019s banking system has not been directly targeted by sanctions, a dozen countries, including Canada, France and Spain, have said they support restrictions on trade with settlements, raising the prospect of further penalties that could affect Israeli financial institutions.<\/p>\n Opponents of Mr. Netanyahu\u2019s government decried his pronouncements, which also drew a rebuke from the generally reserved central bank.<\/p>\n \u201cCrypto currencies cannot serve as a route to bypass sanctions against Israel,\u201d the Bank of Israel said in a statement. The bank added that the government would do better \u201cto focus on preventing sanctions\u201d and preserving Israel\u2019s economic ties with its main trading partners.<\/p>\n Commentators said that Mr. Netanyahu\u2019s outlook sounded apocalyptic, and some said it was part of a scare campaign to improve his election prospects. <\/p>\n Last year, amid growing global condemnation of the Israeli military\u2019s conduct of the war against Hamas in Gaza, where it has been accused of war crimes, and the imposition of some arms embargoes<\/a>, he warned that Israel would have to become a more self-sufficient \u201csuper-Sparta.\u201d That reference to the ancient, insular Greek city-state that practiced militaristic self-reliance was, to critics, a frightening scenario for a small country whose economy is largely driven by a tech sector that is reliant on foreign investment.<\/p>\n Gadi Eisenkot, Mr. Netanyahu\u2019s main rival in Tuesday\u2019s election, said<\/a> in a social media post that the prime minister\u2019s \u201cBibi-coin vision,\u201d a nod to cryptocurrency, would \u201cdismantle the Israeli economy for generations.\u201d<\/p>\n \u201cNo internet purchases, no high-tech investments, no national security,\u201d he added.<\/a><\/p>\n Yair Lapid, the opposition leader who has served as prime minister and finance minister, wrote<\/a> on social media that a vote for Mr. Netanyahu was a vote for \u201ca ruined economy, sanctions that will lead to insane price hikes, and no military alliance with the United States.\u201d <\/p>\n And a former governor of the Bank of Israel, Jacob Frenkel, told Israel\u2019s Channel 12 on Sunday that moving away from the international financial system would turn Israel into \u201ca leper.\u201d <\/p>\n Mr. Netanyahu later walked back his remarks slightly, saying that he had heard the criticism and that cryptocurrency was only one option to deal with potential financial sanctions.<\/p>\n In a somewhat jarring contrast, Mr. Netanyahu\u2019s campaign has argued that Israel\u2019s economy overall is healthy despite years of war, helped by record export revenues, relatively low inflation and unemployment, and a strong shekel.<\/p>\n But many Israelis are not feeling it. The State Comptroller, a government watchdog, warned last year<\/a> that the cost of living was \u201cskyrocketing\u201d in part because of structural challenges in Israel\u2019s consumer market and low competition levels.<\/p>\n