Israel’s economy could be in big trouble now that the government of Prime Minister Benjamin Netanyahu succeeded in passing the first part of its judicial reforms on Monday. The so-called “reasonableness” amendment to Israel’s basic law on the courts passed in a vote of 64 to 56 on party lines. And the Tel Aviv Stock Exchange’s (TASE) Tel Aviv 35 Index fell, losing 2.21%. And after rebounding somewhat after a recent low, the Shekel began to drop again against the US Dollar.
This is exactly what many financial experts have predicted would happen because many are expected to lose confidence in Israel’s political stability and so foreign investments could dry up. This is because they agree with the opposition’s claim that the reforms will harm Israel’s democratic nature. Rating agencies like Moody’s and Standard and Poor’s have also warned about this.
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The chief economist of Leader Capital Markets Yonatan Katz told Israel’s business publication Globes, “We see that there is no macroeconomic element or even markets abroad that affect the exchange rate, the political uncertainty leads to strong fluctuations in the foreign exchange market. The market oscillates from optimism to pessimism and back again.”
Eyal Kishon, chairman of the Israeli Deep Insight Foundation told Tech 12, “The Deep Insight Foundation was established three years ago and we currently have an intern, a young man who came here to work in the summer. His job is to establish relationships with other funds in the world in deep tech because not many funds invest in this field, and companies need more rounds to grow and advance. So he initiates ‘cold’ inquiries to such funds and offers them to cooperate with us and show each other friendship. It’s a fund of 30 people, but he received a response from the fund’s founding partner.”
And a new study from the organization Start-Up Nation Central reported on by JBN Monday showed that 68% of Israeli startup companies have begun taking active legal and financial steps, like withdrawing cash reserves, changing HQ location outside Israel, relocation of employees and conducting layoffs. In addition, 22% of companies reported that they have diversified cash reserves outside Israel and 37% of investors say companies in their portfolios have withdrawn some of their cash reserves and moved them abroad.
Massive protests have rocked Israel since January when Justice Minister Yariv Levin revealed the government’s plans to alter the nature of Israel’s judicial system. The government’s judicial reform plan would greatly curtail the power of Israel’s Supreme Court to nullify legislation passed by the Knesset and also limit the authority of Israel’s attorney general. The opposition charges this would harm Israel’s democracy, eroding foreign confidence in the country and hurting its economy. And this is why the country is now on the brink of what some are describing as the biggest societal clash in Israel’s history.
