Why Netanyahu is suddenly unpopular in Israel

Israeli Prime Minister Benjamin Netanyahu has been put firmly on the defensive for the first time since his election, with tens of thousands of people protesting the surging cost of housing.

With his approval ratings in a double-digit dive, Mr. Netanyahu canceled a trip to Poland today to unveil a series of measures aimed at cooling off real-estate prices that have risen by more than one third since 2007.

But demonstrators rejected the reform package as too narrow, focusing too heavily on students even as the protest movement burgeons well beyond the young people who set up tents in Tel Aviv two weeks ago.

The increasingly mainstream character of the demonstrations reflects an Israeli middle class that is struggling to make ends meet despite robust growth and an all-time low in unemployment.

A wide swath of Israelis blame Netanyahu for not doing enough to address social gaps that have emerged in the wake of Israel's shift from a socialist economy to a more freewheeling, capitalistic society.

"Netanyahu is paying a price for not being seen as socially conscious enough. It is easy to blame him for not caring about the average person," says Shmuel Rosner, a fellow at the Jewish People Policy Planning Institute.

"There is a problem that people who earn decent salaries feel their lives are becoming more economically challenging; prices are rising and salaries are not rising," he adds. "Israel’s economy is great, but not all sectors of Israeli society share the feeling of a more prosperous economy."

Approval rating plummets 19 points

The prime minister has received broad public backing for a confrontational foreign policy toward the Palestinians and a critical stance toward the Obama administration – his approval rating stood at 51 percent after crossing swords with the US president this spring.

But the growing socioeconomic malaise has caused his approval rating to plummet to 32 percent, according to a poll published by the liberal Haaretz newspaper.

The survey numbers reflect fallout from a nearly two-week tent protest on Tel Aviv’s tony Rothschild Boulevard that brought some 20,000 demonstrators into the streets Saturday night. On Sunday, hundreds of protesters marched to the Knesset in Jerusalem, while university students led solidarity tent protests around the country.

The prime minister has pressed cabinet members to come up with proposals that will show the government is responding, and pledged today to build more dorms for students and allocate more new building for middle-class buyers and renters. Netanyahu also faces a festering labor dispute with state-employed doctors and complaints over runaway prices for gas and dairy products.

Knesset members and ministers from the governing coalition have expressed concern about political fallout with the Likud’s blue-collar constituents.

"It will leave a stain," says Shlomo Madmon, a long-time Likud activist. "People are who are dedicated Likudniks are protesting that they will never [again] vote Likud."

Lull in Palestinian violence turns Israelis' attention to pocketbook issues

Netanyahu has touted himself as an responsible economic leader who supports liberalization amid a globalized economy, but the public also remembers him cutting social-welfare payments and pushing privatization of state companies as finance minister in the first half of the 2000s.

"The housing is a symptom … . Although there is a really good macroeconomic aggregates like GDP [gross domestic product] growth and unemployment, the problem is that we have very large income inequality," says Momi Dahan, an economics professor at Hebrew University.

He says that such issues are coming to the fore because of a relative low in Palestinian violence.

"When it is quiet in the area of security, then all of the other problems come to the surface," Prof. Dahan says. "People are sick of the rules where some people get a six-digit salary, and a cleaning woman or a cashier has a hard time feeding their kids."