Prime Minister Benjamin Netanyahu met Tuesday with Bank of Israel Governor Amir Yaron due to warnings that the ruling coalition’s plans to upend the judiciary could scare away investors and negatively impact the country’s credit rating.
According to Hebrew media reports, Yaron outlined for Netanyahu the potential consequences of the proposed judicial overhaul and relayed warnings made by senior economic figures and officials from credit rating firms during his recent meetings at the World Economic Forum in Davos.
Yaron explicitly told Netanyahu that the shakeup of the judiciary would harm the economy, the Kan public broadcaster and Channel 12 news reported.
The latter network said Netanyahu did not signal any inclination to soften the planned judicial makeover at Tuesday’s sit-down, which was described as an emergency meeting. It also reported that the Bank of Israel sent the Finance Ministry a list of concerns raised by international ratings agencies.
The face-to-face talks were Netanyahu’s first with Yaron since reclaiming the premiership last month. Netanyahu appointed Yaron as the central bank chief during a previous term as prime minister.
A statement from the Bank of Israel said Yaron spoke with Netanyahu about “various issues that came up… in deliberations held in recent weeks with senior international economic officials and senior officials at ratings companies,” without mentioning the planned changes to Israel’s judicial system.
The statement said Yaron also gave Netanyahu an overview of the Israeli economy and the challenges it faces, presented the bank’s “strategic economic plan,” and discussed various unspecified issues ahead of the next state budget.
There was no readout from Netanyahu’s office on the meeting, which came hours after hundreds of tech workers held an hour-long strike to protest the planned changes.
On Sunday, former Bank of Israel governors Karnit Flug and Jacob Frenkel warned in a joint op-ed that the government’s plans for a sweeping overhaul of the country’s judiciary could negatively affect Israel’s credit rating, and “deal a severe blow to the economy and its citizens.”
“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.
The credit rating agency Standard & Poor’s (S&P) said earlier this month that the judicial makeover plans, as well as the new government’s hardline policies in the West Bank, could negatively affect the country’s rating.
S&P’s Director of Global Ratings Maxim Rybnikov told Reuters: “If the announced judicial system changes set a trend for weakening Israel’s institutional arrangements and existing checks and balances this could in the future present downside risks to the ratings.”
As presented by Justice Minister Yariv Levin, the coalition’s proposals would severely restrict the High Court’s capacity to strike down laws and government decisions, with an “override clause” enabling the Knesset to re-legislate struck-down laws with a bare majority of 61; give the government complete control over the selection of judges; prevent the court from using a test of “reasonableness” to judge legislation and government decisions; and allow ministers to appoint their own legal advisers, instead of getting counsel from advisers operating under the aegis of the Justice Ministry.
The talks with Yaron follow a meeting Tuesday between Netanyahu and Finance Minister Bezalel Smotrich aimed at setting the new government’s fiduciary policies.
According to a joint statement, the two agreed to maintain a responsible fiduciary course and to coordinate the government’s positions with the Bank of Israel’s monetary policy.
Smotrich, whose far-right Religious Zionism party is a major proponent of curbing the judiciary’s powers, appeared to brush off the warnings over any potential economic fallout.
“In the face of the fear-mongering by the opposition and its irresponsible actions that are meant to harm the State of Israel’s economic strength, the coalition is unified and responsible and will work together for Israeli citizens,” he said.
He also said a budget for the coming year will be unveiled “very soon.”