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Protests against Netanyahu, risks to economy


Israeli Prime Minister Benjamin Netanyahu speaks as he and Finance Minister Bezalel Smotrich hold a news conference to present a plan to deal with price increases in the Israeli economy at the Prime Minister’s office in Jerusalem, May 11. 1 year 2023.

Ronen Zvulun | Reuters

The Israeli shekel fell nearly 6% in February and was at a three-year low against the dollar, as political uncertainty increased due to controversial judicial reforms led by Benjamin Netanyahu’s right-wing government. promote.

An estimated 160,000 protesters took to the streets of the capital Tel Aviv over the weekend, along with tens of thousands of others who gathered in other cities, to protest against a planned legal overhaul by the ruling coalition. rights, which would significantly undermine Israel’s judicial system.

Signs carried by crowds of protesters read “No constitution, no democracy” and “They won’t pass.” Members of Israel’s business, academic, legal and even military communities have warned of the changes.

Former Israeli Prime Minister Ehud Barak called the plan “the assassination of the Declaration of Independence, which would turn Israel into a dictatorship” and described the current situation as “the worst crisis since its founding.” government.”

Thousands of Israelis demonstrate against the Israeli Government’s judicial overhaul bills in the coastal city of Tel Aviv on February 25, 2023. Protesters confront police and block the Ayalon highway.

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Prime Minister Netanyahu has called the protests – now in their third month – an attempt to “create chaos” and trigger another election. Israel, deeply divided, has had five snap elections since April 2019.

What are the suggested changes?

In short, the proposed judicial overhaul would severely limit the ability of the Supreme Court of Israel to review and reject laws it considers unconstitutional. The Knesset – Israel’s parliament – voted last week to push forward a key part of the reforms.

They basically have four main clauses:

  • Allows the Knesset to overrule Supreme Court decisions with a simple majority of 61 out of 120 seats while the courts can now block any law they deem unconstitutional
  • Removed the Supreme Court’s ability to judge Knesset law and other government decisions on the grounds of “reasonability”; This principle was implemented in the court’s recent decision to rule one of Netanyahu’s ministerial appointments as “very absurd” because of a criminal record.
  • Giving the most control over the appointment of judges to the governing coalition, rather than to a committee of legal experts and current representatives
  • Allows ministers to appoint their own legal advisers and takes away ministers’ authority to make binding decisions

Netanyahu and his justice minister Yariv Levin say the changes are necessary to prevent the Supreme Court – which is not elected – from unduly interfering with the Knesset’s cabinet and decision-making.

“The claim that this reform is the end of democracy is baseless,” Netanyahu said in response to a wave of criticism. The prime minister himself is currently under investigation for multiple corruption and other charges, meaning he could potentially benefit from a weaker judiciary.

He stated that “the balance between sectors in the government system has been violated in the last two decades, and even more severely in recent years” and that reforms will “restore the correct balance between industries.”

But much of Israeli civil society, along with current and former legislators, strongly disagree.

Israel's judicial overhaul proposal would be a 'complete revolution': Former central bank official

Yohanan Plesner, president of the Israel Democracy Institute, told CNBC: “All working, healthy and strong democracies have clear separation of powers as well as checks and balances to ensure that No single person or organization holds too much political power.”

“The main danger arising from the planned judicial overhaul is that this package will [in] actually do it – concentrate all political power in the hands of the executive branch, which already gives significant control over the Knesset, the legislative branch of our government.”

Mr. Netanyahu said that enacting the changes was part of the mandate he won when he was re-elected in November. But Avi Himi, head of the Israel Bar Association, spoke of the prime minister during a rally. recently, “You’re never supposed to change the regime, you’re never supposed to destroy democracy. It’s our right to scream, it’s our duty to scream, that’s how it works in a democracy.”

Economic impact

The crisis is now spilling over into Israel’s economic future and has hit stocks and the national currency, with the Tel Aviv Stock Exchange’s benchmark TA-125 index falling nearly 4% last week.

Goldman Sachs wrote in a research note last Friday: “Although substantial political rewards now appear to have been incorporated into the ILS (Israeli New Shekel), risks remain for the shekel in the future. short time. “With increasing market concerns around judicial reform, a simple benchmarking exercise shows that around 8% of the risk premium has emerged to build the shekel.”

People demonstrate against Israeli Prime Minister Benjamin Netanyahu’s bill to limit the powers of the judiciary and his right-wing policies at Dizengoff Square in Tel Aviv, Israel on February 25, 2023.

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Zvi Eckstein, former deputy governor of the Bank of Israel, explains the risk this could pose to the country’s key technology sector.

“Israel’s economy is very unusual – 17% of Israeli production, 11% of the workforce, engaged in research and development in the high-tech sector,” Eckstein said. “All of this is funded by venture capital that comes from abroad, almost 90% of this,” he said. The proposed judicial reforms now mean “great uncertainty for the economy, great uncertainty for domestic and foreign investment in Israel.”

Plesner at the Israel Democracy Institute agreed.

“Investors and the global economy as a whole are not only looking for stability, but are often attracted to countries with independent institutions such as the judiciary and a strong central bank,” he said. .

Plesner warned that limiting the independence of institutions “resulted in a reduction in foreign investment and a lowering of their credit ratings”. “We can only hope that Israel’s leadership understands the risks it is posing to the Israeli economy.”

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