For house protests, read class warfare

On the face of it, Israel's economy has never been in such a good state. Unemployment is at an all-time low at 5.7 per cent, the gross domestic product grew last year by 4.5 per cent, the shekel is strong, trade is booming, Israeli companies are traded on Nasdaq and foreign corporations are snapping up local companies. And now natural gas finds in the Mediterranean are promising energy independence and a new export market.

So why have tens of thousands of middle-class Israelis taken to the streets in recent weeks, complaining that they cannot afford to live in the country? The initial motive was the price of housing, which has spiked due to the booming economy and low interest rates, and the lack of new, affordable homes. But the price of new flats and rentals is only part of the story.

Much of the boom has been concentrated in a relatively small layer of high-salary earners and a much smaller number of families who are major share-holders in the corporations that have taken advantage of the rapid privatisation in the Israeli economy in recent years. Fiscal reforms have reduced taxes mainly for corporations and those in higher income bands. Meanwhile, the average earner continues to pay tax rates frozen at their historically high levels.

The average income of middle-class Israeli family is around £2,500 a month, which is lower than the average family's expenditure. Some argue that this means Israelis are being greedy, seeking a lifestyle beyond their means. The protesters are saying that if Israel had free childcare for under-three-year-olds, a better regulated housing market and a more balanced tax burden, most people would not be trailing bank overdrafts.

The ‘social equality’ facade of the protesters is falling away

It is not only a classic argument over open-market capitalist economy versus social democracy systems.

The fact that most of the protesters are secular and left-of-centre means they also believe that their tax money should not have to go to finance settlements in the West Bank, high defence costs and benefits for a strictly-Orthodox community with a low average of participation in the workforce.

The "social equality" façade of the protests is already starting to fall away and this is about to become a standard Israeli squabble between "spoilt Tel-Aviv leftists" and "religious parasites".

Last updated: 1:28pm, August 4 2011