Judicial reform: A promising first vote puts the economy back on track - opinion

Last Wednesday afternoon it seemed as if, for the first time since the initial proposal of the notorious judicial reform, some clarity had returned to the Israeli government. There was a glimmer of hope that Israel and her economy are getting back on the right track.

The judicial reform, first proposed in January of 2023, calls for a change in the composition of Israel’s judicial selection committee. Although there is no current law defining the exact composition of such a committee, it has held a mutually agreed status quo – until now. Out of the nine committee members, the reform proposes increasing the number of MKs from three to five.

The Knesset’s vote on Wednesday, however, not only did not enforce the change of committee composition but even elected a member of the opposition as a committee member. A promising step towards getting Israel’s economy back on track?

Consequences to Israel's economy

After 24 weeks of protesting and a nationwide uproar on the judicial reforms, Israel’s economy has suffered the consequences. Just a month after the announcement of the reforms, 780 million investment dollars were withdrawn by hi-tech companies in February. And this daunting trend continues. Israel is currently experiencing an 80% decrease in hi-tech investments, with predictions of an astonishing 90% decrease over the next quarter, compared to previous years. 

From the very beginning, experts have warned Netanyahu that the judicial reform would come at a high cost to the economy – which is now beginning to manifest in the form of an economic recession.

Netanyahu has prided himself for years on being the leader of one of the most successful economies worldwide. Israel joined the OECD in 2010 under Netanyahu, and in 2021, had the 26th highest GDP worldwide. Israel’s brand as “the start-up nation” has attracted great investments from all over the world with over 80% of hi-tech financing coming from abroad. 

We got so used to Israel being a success story that we forgot how fragile it really is. The question we’re left with is whether Netanyahu and his government understand this.

Let’s set aside Left or Right, religious or secular for a moment. We all enjoy economic prosperity and it is in all of our best interests to see Israel’s economy flourish. However, the government must not forget that this success is not due to Israel alone. The trust of Israel’s investors is based not only on economic interests but also on sharing similar values.

Four MK's vote anonymously

The US and EU are two of Israel’s biggest trading partners and both have repeatedly expressed their discontent about the proposed judicial reform. It disrupts the checks and balances of the Israeli system of government, one of the fundamental pillars of a strong democracy. Investors have been observing Israel’s situation closely and our economy is starting to feel their distrust.

Despite a heretofore rock-solid coalition discipline in Netanyahu’s government (in which all members vote according to coalition management lines), we may be observing, for the first time, the trickle effect of the nationwide. Four coalition MKs chose to vote anonymously for Yesh Atid’s Karine Elharrar, the only candidate proposed by the opposition for the Judicial Selection Committee. 

Although the norm has been to assume that committee members would be selected from both the opposition and the coalition, Wednesday’s vote could have been a moment of truth vis-a-vis the enactment of the judicial reform. For the first time, the coalition discipline appears to have been broken and those four MKs may have taken a first step toward restoring Israel’s political and economic stability.

Just hours before the Knesset vote, a report about a letter from trusted senior Israeli economists was released. This letter warned Netanyahu once again about the economic consequences of pushing through the judicial reform. 

Seeing the bigger picture

Although just a small first step, electing Elharrar to the committee may have been a way of settling the murky waters and a sign that some decision-makers are keeping the bigger picture in mind, even when the government – and particularly Netanyahu – seem to be ignoring it. 

After Netanyahu’s declaration on Sunday morning, to move ahead with parts of the judicial reform, we have yet to see if our hope for change has sparked too early.

At this point, all we can wish for is that politicians will be reminded of a broader perspective because when this nation elects a government, regardless of Left or Right, it also votes for a strong economy. 

This promise still needs to be fulfilled – for everyone’s sake.

The writer is a third-year student in Government & Sustainability and Argov Fellow at Reichman University.