Ex-Bank of “Israel” Chiefs Warn Judicial Overhaul “Could Deal Severe Blow” to Economy

By Staff, Agencies

Two former Bank of “Israel” governors, Karnit Flug and Jacob Frenkel, joined warnings Sunday that the “Israeli” government’s plans for a sweeping overhaul of the entity’s judiciary could negatively affect “Israel’s” credit rating, and “deal a severe blow to the economy” and the “Israelis”.

In a joint op-ed in the Yedioth Aharonoth daily, Flug, who served a five-year term as the central bank chief ending in 2018, and Frenkel, who was in the role between 1991 and 2000, cautioned that the changes proposed by the entity’s so-called “Justice Minister” Yariv Levin are expected to have a snowball effect.

“The weakening of the judiciary system (…) is expected to lead to a decrease in the willingness of foreign investors to invest in ‘Israel’, and an increase in the cost of raising funds for the ‘Israeli’ government as a result of a possible downgrading in the country’s credit rating,” Flug and Frenkel explained.

Levin’s wide-ranging and controversial overhaul of the entity’s judicial and legal system would severely limit the authority of the so-called “High Court of Justice”, give the government control over the judicial selection committee, and significantly limit the authority of government legal advisers. The changes advanced by Levin have in recent weeks been criticized by senior executives in the high-tech industry, as well as by money managers, for posing a clear and present danger to the system of checks and balances on government power.

Flug and Frenkel stressed they wrote the op-ed “out of deep concern for the economic consequences and risks” inherent in the proposed changes to the entity’s legal system. The two clarified that their positions are based on many years of experience and personal involvement in dealing with the economic challenges of the ‘Israeli’ economy, including experience and close familiarity with how international economic bodies and institutions – such as credit rating agencies – work.

They highlighted examples in recent years of countries such as Turkey, Hungary, and Poland, where a judicial review and a deterioration of the status of the legal system have weakened checks and balances, and state authorities have been undermined, vastly increasing the powers of governments. The countries have suffered from drops in foreign investments and a downgrading of their sovereign credit ratings.

“Israel’s situation is still far from that of countries like Hungary and Poland, and its situation is immeasurably better than that of Turkey, but it is important to understand that there is a connection between seemingly unrelated processes such as the judiciary’s ability to criticize the government and trust in the economy, which affects economic performance,” Flug and Frenkel wrote. “The proposed moves to weaken judicial review increase the risk of a harsh and painful reaction.”

They stressed that “the strength, professionalism and independence of the judicial system is a central factor determining the ‘Israeli’ economy’s status in the global economy.

“At the present time, when geopolitical and economic uncertainty prevails throughout the world, precisely in such a sensitive period it is very easy to destroy an economic image, and very difficult to restore,” they warned.

Meanwhile, dozens of “Israeli” companies, including workers at multiple high-tech companies, were expected to hold a one-hour strike Tuesday against the government’s legislative plans.

Speaking to the entity’s Channel 12 Sunday evening, Frenkel said his and Flug’s op-ed was “an alarm clock saying ‘Wake up… you are playing with fire here. There’s a real danger.'”