I think ELY001 is presenting a good plan, it's only natural that the flag carrier of Israel will aim to develop its hub as a.. regional hub.

However, I think that the open-skies treaty will not do well, and actaully might well get the Israeli airlines, including EL AL, bankrupted.
It's not a fair game- about 300 European airlines would be able to fliy to Israel (that means - to TLV, the sole int'l airport) while Israeli airlines, not only they are not assured to be granted slots at major airports, they have security requirements, so they cannot just fly to any airport in Europe. As a matter of fact, I'm not sure if most European airports would be found satisfactory for the security standards (my guess - only large airports can) so what you get out of this treaty is win-lose situation, in my opinion.

If EL-AL was to develop itself as a hub for the eastern Mediterranean and Balkans, that could be done by seperate (dedicated) treaties.