5 bank heads to PM: Stop overhaul immediately, you’ll turn Israel into dictatorship

Top business leaders call on PM to halt contentious legislative process, saying it ‘undermines the foundations of democracy’ and will damage economy and society as a whole

Prime Minister Benjamin Netanyahu attends a Knesset session on March 20, 2023 (Erik Marmor/Flash90)
Prime Minister Benjamin Netanyahu attends a Knesset session on March 20, 2023 (Erik Marmor/Flash90)

Dire warnings against the judicial overhaul continued Tuesday from the business community, with a forum of bank chiefs and other industry leaders telling Prime Minister Benjamin Netanyahu the legislative process will “turn Israel into a dictatorship.”

The signatories on the letter to the premier from the Israel Business Forum included the heads of some of the country’s most successful businesses, as well as the top executives of five banks.

“We call on you to immediately stop the planned legislative moves, chief among them the law to change the committee for the selection of judges,” read the letter, referring to the judicial appointments bill that will cement coalition control over the selection of judges, including High Court justices.

“This law seriously harms the legal system and undermines the foundations of democracy based on the separation of powers and the independence of the legal system, and turns Israel into a dictatorship,” read the letter.

“This move will seriously damage Israel’s economy, and beyond that it will damage Israeli society as a whole, its resilience, its security and its values,” the letter charged.

“The forum rejects with disgust the threats and attacks on the gatekeepers in Israel, the High Court of Justice, the attorney general, the IDF, the Shin Bet and the police,” the letter added.

The Tel Aviv Stock Exchange, December 25, 2018. (Adam Shuldman/Flash90)

The signatories were headed by forum leader Harel Wiesel, CEO of the Fox Group, and included the heads of Bank Mizrahi Tefahot, First International Bank of Israel, Bank Hapoalim, Bank Leumi and Israel Discount Bank.

The top executives at Phoenix and Harel insurance groups also signed the letter, along with leaders at the Azrieli Group and Deloitte, and the heads of the Isrotel, Dan and Fattal hotel groups and the Shufersal, Strauss and Super-Pharm retail giants.

Meanwhile, officials in the Finance Ministry are said to have warned Finance Minister Bezalel Smotrich that the plan to weaken the judiciary will damage the economy and “could lead to a continuous decline in growth… estimated between 0.2 percent and 0.4%.”

The document warned that a decline at that rate could lead to a “decrease in the annual GDP growth of between 2.8% to 5.6% in about a decade,” Channel 12 reported.

Despite mass protests and opposition from leading economic voices and former policymakers calling for the protection of checks and balances, the government has declared itself determined to press ahead with the proposed package. The legal changes would grant the government total control over the appointment of judges, including High Court justices, and severely limit the High Court’s ability to strike down legislation.

This week coalition party leaders said they intend to push through some of the controversial judicial changes before the Knesset breaks for Passover at the beginning of April, and then resume the advancement of the rest of the legislative package that makes up the government’s plans to radically overhaul the judiciary after the recess, urging the opposition to use the time for “negotiations.” The opposition has refused to negotiate with the government due to the latter’s insistence on not freezing the legislative process.

Israelis protest against the government’s planned overhaul to the legal system, outside the president’s residence in Jerusalem, on March 4, 2023. (Yonatan Sindel/Flash90)

On Monday, the Finance Ministry’s chief accountant called for a sustainable solution to the crisis to help restore confidence among international investors and sovereign credit rating agencies.

Speaking at a conference of the Israel Manufacturers Association, Yali Rothenberg also warned that broad agreement needed to be found so that the country’s World Bank governance indicators (WGI) would not be adversely affected. The WGI is an index that measures the quality of governance according to six criteria including rule of law, control of corruption, and voice and accountability.

Earlier this month, Fitch Ratings warned that the planned judicial changes could have a “negative impact” on its credit profile. The rating agency also emphasized that some countries that have passed major institutional reforms reducing institutional checks and balances have seen a significant weakening of World Bank governance indicators.

Moody’s rating agency also warned that the planned judicial overhaul could weaken the country’s institutional strength and if fully implemented could be “credit negative,” posing a threat to the economy and in particular to capital inflows into the tech sector.

The tech sector employs just a tenth of Israel’s workforce but is responsible for over half of the country’s exports. In 2017, 92% of all income tax revenue came from just 20% of adults.

‘Without democracy, there is no high tech,’ ‘Even without ChatGPT, we know that you are wrong’ and ‘No freedom, no high-tech’ — tech workers protest judicial overhaul, in Tel Aviv, on January 24, 2023 (Tomer Neuberg/Flash90)

The government’s impending judicial makeover has already fueled uncertainty and fears among many investors and entrepreneurs, some of who are seeking to move their funds out of the country and set up shop elsewhere.

Also speaking at the Israel Manufacturers Association conference, Sharon Shulman, chairman and CEO of the Ernst & Young accountancy firm in Israel, said that in the tech industry more and more new companies want to be incorporated as US companies and more existing tech companies want to be re-incorporated as US firms.

Concerns are not limited to large businesses and tech giants. According to a poll published Monday, small businesses in Israel fear the impact of the government’s planned far-reaching overhaul of the judiciary, with almost half saying they are convinced their business will be harmed by its ramifications.

Sharon Wrobel contributed to this report.

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