Netanyahu: False threats against judicial overhaul sabotaging economy

The political opposition is sabotaging Israel with false threats that judicial overhaul will harm the country’s economy, Prime Minister Benjamin Netanyahu said at a press conference on Wednesday evening. “The opposite is true,” Netanyahu said as he rebuffed charges that a proposed judicial reform would harm the country’s democratic status and thus lower its credit rating, reduce foreign investment and prompt major companies to relocate to other countries.

"The opposite is true," Netanyahu said as he rebuffed charges that the judicial reform would harm the country's democratic status and thus lower its credit rating, reduce foreign investment and prompt major companies to relocate to other countries.

The proposed plan will strengthen the economy and judiciary and upgrade Israel’s “judicial status to that of most of the leading democracies in the world” by restoring it where it was 50 years ago, Netanyahu said.

He compared his judicial overhaul plan with the economic reform plan he put in place close to two decades ago when he was finance minister, in which he removed “excess” regulation to allow for a more free-market approach.

“If there is one major growth engine in the State of Israel, it is the removal of excess regulation and the removal of excess judicialization,” Netanyahu said.

He was joined in the press conference by Finance Minister Bezalel Smotrich, Foreign Minister Eli Cohen and Economy Minister Nir Barkat.

They all blamed the opposition for spreading what they claimed were falsehoods and doomsday predictions in order to intentionally harm the economy, instead of acting “responsibly.”

“We reduced government spending, lowered taxes and increased competition and as a result we got one of the strongest economies in the world and strengthened Israel’s economy,” Netanyahu said.Cohen, who attended last week’s World Economic Forum in Davos, said that since entering office earlier this month, he had spoken with scores of world leaders and none of them even hinted at concerns over the judicial overhaul plan.

“The opposite,” he said. “They want to strengthen their economic ties with Israel,” including six countries that want trade agreements with Jerusalem. He pointed to the example of Great Britain, which wants to upgrade its free-trade agreement with the Jewish state.

Even countries that do not have formal diplomatic ties with Israel want to increase their contacts with it, particularly because of the country’s economic prowess, Cohen said.

He specifically mentioned the 2020 Abraham Accords under whose auspices Israel has normalized ties with four Arab countries, improved the economy and led to $5 billion in trade.

Netanyahu compared the criticism he received to that which had been leveled against his financial overhaul, as well as against actions he took during his last tenure as Prime Minister. This included his opening of natural gas fields, his push for Israel to normalize ties with the Arab world before resolving its conflict with the Palestinians, and his leadership of Israel during the COVID-19 pandemic.

“These days, I am holding public and secret meetings to expand the Accords, and I am certain that when breakthroughs occur” and this work bears fruit, it will lead to even more economic growth, Cohen said.

He added that the current political instability has harmed Israel economically – and the stabilization brought about by a government that will remain in power will only help the country’s financial standing.

The prime minister compared criticism he has received to that which was leveled against actions he took during his last tenure as leader. This included his opening of natural gas fields, his push for Israel to normalize ties with the Arab world before resolving its conflict with the Palestinians, and his leadership of Israel during the COVID-19 pandemic.

“Over the years, many people were wrong all along the way,” he said. “The removal of gas from the ocean, which has received many criticisms and protests from many, has already brought in tens of billions of shekels a year.

“Today, everyone is blessed by it, including those who opposed it. This step was delayed for years due to excess legalization,” he said. “Unnecessary legal processes delayed important projects for years, such as Highway 6 and the high-speed train between Tel Aviv and Jerusalem. Projects that made the lives of millions of citizens easier were stopped and delayed for years. The excess of legalization is like sand in the wheels of the Israeli economy.”

Smotrich spoke next, beginning his complaints against critics of the proposed judicial reform by remarking that “a lie that is repeated a lot apparently becomes the truth. A billion lies will not become the truth.

“Israel’s macro data are fantastic due to consistent and good government policies. Public spending has decreased and its composition is much more growth oriented than in the past and than in most other countries,” he continued. “We will continue with the same responsible policy of a budget biased towards infrastructure and growth.

“We are working hard these days and formulating a package of huge reforms, ones that will reduce regulation and bureaucracy and strengthen competition,” Smotrich said. “Israel is the Start-Up Nation, and precisely against the background of the uncertainty in the world markets, the State of Israel will be an island of stability, certainty and responsibility, and this will be the best place [for investors] to put their money.”

According to critics, the proposed reform would severely diminish Israel’s reputation among foreign investors and negatively affect the state’s credit rating by severely limiting the legal authority of Israel’s High Court of Justice.

Economists: Israel's credit rating will be weakened by reform

More than 270 senior Israeli economists published a letter on Wednesday morning warning against the proposed reforms. The signees included experts from all sides of the political spectrum, including Nobel Prize-laureate Daniel Kahneman.

“We, lecturers in economics and management, express our deep concern regarding the government’s actions intended to weaken the judicial system and public service’s independence, which we think will cause unprecedented harm to Israel’s economy,” the economists wrote..

Israel’s economy is small yet open, and its attractiveness to foreign investors is due in a large part to its strong judiciary and public gatekeepers, which ensure that investors will be shielded from capricious government decisions, the economists argued. Weakening the judicial system would “significantly raise” the possibility of a decrease in Israel’s credit rating – as happened in Poland in 2016, when the credit rating service P&S explained its decision to lower the country’s credit rating on its weakening of its judiciary, they said.

The decrease in investments will lead first and foremost to damage to Israel’s “economic engine,” the hi-tech sector, the economists warned. This, combined with the fact that weakening the judiciary would lead to a weakening in the defense of personal liberties, could also lead to a “brain drain.”

In the long term, some of the most oft-quoted papers, including those by Nobel Prize laureates, show that the concentration of power can lead to irreparable weakening of state economies, since the power often remains concentrated for decades, they added.

For these reasons, the economists “forcefully” warned against the coalition’s current steps, which would constitute “a fundamental change to Israel’s governing system and a danger to the future of Israel’s economy.”

On Tuesday, following a meeting with the president of the Bank of Israel, Netanyahu and Smotrich issued a statement to dispel these criticisms, saying that “the [government’s] intention is to maintain a responsible and restrained fiscal policy, and its alignment with the Bank of Israel’s monetary policy in order to preserve and stabilize Israel’s economy for the next four years.”

Earlier this week, the S&P credit-rating agency warned that the reform could have serious consequences for Israel’s rating – a sentiment supported by several leading experts in Israel, including Prof. Karnit Flug, vice president of the Israel Democracy Institute and a former Bank of Israel governor.

“Based on the experience of some other countries that went in the same direction, if the government goes ahead with the judicial reform as it intends, we definitely have a heightened risk of reducing our sovereign credit rating,” Flug told The Jerusalem Post.

In response to Wednesday night’s press conference, opposition leaders accused Netanyahu of not taking the economists’ warnings seriously.

Opposition leader MK Yair Lapid said, “Netanyahu’s hysterical and perspiring press conference does not leave room for doubt: Bibi is weak and he knows that he is leading to severe damage to Israel’s economy. All of Israel’s citizens will pay for it out of their pockets, and it will be costly.”

National Unity chairman MK Benny Gantz wrote on Twitter that the prime minister “disparages the protesters, threatens the attorney-general and cancels the [Bank of Israel] governor – but the reason to stop the coup d’etat is not just a dip in Israel’s credit rating or that IDF commanders abroad will not be [legally] defended – but first and foremost because it will ruin the basic values upon which the State of Israel was founded.

“Netanyahu, history will not forgive you for your destruction of the governing system and the split you are creating among the people. It is not too late to stop,” Gantz wrote.

Labor chairman MK Merav Michaeli said in a video that “two hundred and seventy of the most senior economists, some of whom Netanyahu appointed, together with the governor of the Bank of Israel, another Netanyahu appointee, say that the overthrow of the judicial system is a grave danger to Israel’s economy. No matter how many press conferences Netanyahu holds, or how many of his Likud bulldogs he sends to attack the governor of the bank, the judicial overthrow endangers Israel. We won’t allow it to pass.”

MK Avigdor Lieberman said, “The press conference of the prime minister and the three ministers proves that they are S-C-A-R-E-D, because they know the truth and understand that no party in the world is ready to swallow their lies and fabrications. The State of Israel is on the way to a crisis; an economy the likes of which we have not known for decades, and everything is Benjamin Netanyahu’s responsibility.”•