Bank of Israel governor says judicial reform could hurt economy – reports

Bethan McKernan

The Guardian  /  January 25, 2023

Amir Yaron said to have warned PM that erasing democratic checks and balances could deter crucial foreign investment.

The governor of the Bank of Israel has warned Benjamin Netanyahu that his new government’s proposals for sweeping judicial reform could damage the country’s economy, according to Israeli media reports.

Professor Amir Yaron met the Israeli prime minister on Tuesday, according to the Yedioth Ahronoth newspaper, after requesting an “urgent meeting”.

Yaron reportedly conveyed worries shared by fellow attendees at last week’s World Economic Forum summit in Davos that the overhaul of Israel’s justice system would erase democratic checks and balances, potentially leading to a decision to lower the country’s credit rating and scaring away foreign investment.

Much of the country’s high-tech sector – which at 15.3% of GDP is the main engine of economic growth – is funded by outside investors.

The governor’s reported intervention comes after a public rebuke of the government’s plans by two of his predecessors earlier this week, and a strike by several hundred tech sector employees in Tel Aviv’s “Silicon Wadi” on Tuesday.

An official statement released after the meeting at the Knesset said: “The governor of the Bank of Israel reviewed the state of the Israeli economy and the challenges it faces, both local and from an international perspective.”

Netanyahu returned to office in December at the head of the most rightwing government in Israeli history: various elements of the coalition wish to annex the occupied West Bank, roll back pro-LGBTQ+ legislation, limit freedom of speech and give the Knesset the power to overturn supreme court decisions.

Critics say this last point would help Netanyahu evade a conviction in his ongoing corruption trial, in which he denies all charges, and fundamentally undermine democratic norms and civil liberties in a country with no formal constitution.

“Investors don’t just think about tomorrow, they are looking at the next decade. They do risk analysis: shareholders are asking me, ‘What’s plan B? Should we take our funds out of the country?’ Investors need confidence that governments and countries will behave like democracies,” said Eynat Guez, CEO and co-founder of Papaya Global, a startup unicorn developing workforce management software.

“The feeling in our sector is that politicians like to use us as the face of the country when it suits them. So if they want to use us as poster boys, now they have to listen to our voices too.”

Tuesday’s hour-long strike at one point blocked traffic on a busy thoroughfare in central Tel Aviv, as marching workers held placards reading “No high-tech, no taxes.”

It follows major demonstrations in cities across the country over the last few weekends which have managed to unite people of differing religious beliefs, ethnic background, income and political leanings in what is usually a highly polarized society.

Guy Tytunovich, CEO and founder of CHEQ, a cybersecurity company, said: “I am worried both as a citizen and as a CEO about democracy, but the strike on Tuesday and other actions are proof that there are ways for us to combat this.

“There is optimism that the government will have to listen … I’m willing to invest time and money into this cause because no one wants our country to turn into Turkey or Hungary.”

The judicial reforms must clear three Knesset plenum votes to become law. Israel’s Channel 12 News reported on Tuesday that the coalition has made overhauling the legal system its top priority, and hopes to pass the bill by early April.

Bethan McKernan is Jerusalem correspondent for The Guardian