Bank CEOs warn PM that money starting to move out of country amid judicial shakeup

Netanyahu meets with businesspeople amid concerns that weakening courts will harm economy, insists opposite will occur; says open to dialogue but overhaul to go ahead without delay

A handout photo from the Likud party shows Prime Minister Benjamin Netanyahu meeting with a group of businesspeople at his Likud party's headquarters in Tel Aviv, January 27, 2023. (Courtesy)
A handout photo from the Likud party shows Prime Minister Benjamin Netanyahu meeting with a group of businesspeople at his Likud party's headquarters in Tel Aviv, January 27, 2023. (Courtesy)

Israeli bank chiefs warned Prime Minister Benjamin Netanyahu of potential economic fallout from his government’s proposals for a sweeping makeover of the country’s judiciary Friday, as he said he was open to dialogue but insisted that he will not slow efforts to advance the judicial overhaul.

Netanyahu met at his Likud party’s headquarters in Tel Aviv with the heads of several of Israel’s largest banks and other businesspeople, seeking to push back against a growing chorus of warnings from top business leaders and senior economists.

Bank Hapoalim CEO Dov Kotler told Netanyahu that banks have started to see an outflow of funds in recent days, with various savings accounts being moved from Israel abroad.

“It’s still not on a dramatic scale but we are concerned this is the start of trend,” Kotler was quoted as saying by the Walla news site and Channel 12.

Discount Bank CEO Uri Levin said: “It’s impossible to ignore all the economic figures expressing so much concern over the moves, and therefore you need to stop immediately and only advance changes cautiously and with broad agreement. Maybe we are wrong and you’re right, but the price of a mistake could be a fatal blow to democracy and the economy.”

Also present was Samer Haj-Yehia, chairman of Bank Leumi, businessman and Netanyahu associate Shlomi Fogel, and tech venture capitalists Michael Eisenberg and Chemi Peres, the son of late president Shimon Peres.

“The public is determined to fight. This is a cross-party war between Israeli citizens and the government. You don’t lead a revolution like this without changes or dialogue. You need to stop this madness and start to talk,” Peres said, according to Channel 12.

Illustrative: The Tel Aviv Stock Exchange. November 29, 2020. (Miriam Alster/FLASH90)

Netanyahu argued during the meeting that excess judicial oversight was hampering economic growth.

“The great success of Israel’s economy isn’t because of judicialization but in spite of it,” he was quoted as saying in a Likud statement. “The judicial reform will help Israel’s economy and businesses.”

“Not only will the reform not harm the economy, it will cause it to take off,” he added.

Netanyahu also said that Justice Minister Yariv Levin, a member of his Likud party and the leading figure in the push to upend the justice system, was open to discussing his planned changes with opponents — “alongside the legislative process and without delaying it.”

“Up until now we haven’t heard any willingness by the other side for enacting change. Even the smallest change in the eyes of the critics is ‘the end of democracy,'” Netanyahu said in the meeting,

Channel 12 and Ynet, citing unidentified sources, reported that the intense public backlash to the planned overhaul has surprised and disturbed Netanyahu, who had hoped to pass changes without bringing on such widespread condemnations and high-profile opposition from numerous leading figures. The reports said Netanyahu had also wanted to avoid becoming the face of the sweeping reforms, as his ongoing criminal trial ostensibly precludes him from involving himself directly in issues that could influence his affairs.

The reports said the manner in which Levin has handled the issue so far had caused tensions with Netanyahu. Likud in a statement rejected such assertions, saying the minister had the premier’s full support.

Speaking to Channel 12 Friday night, Zvika Williger, owner of the Willi-food importer of foodstuffs who was present at the meeting, said: “We’re very worried by what’s happening… the premier completely understands the situation. I think we can trust the prime minister not to carry out a hasty plan. He specified that there will be dialogue. He specified that he’s prepared for the president to be a mediator between the sides…. He told me, ‘I promise we won’t harm the Israeli economy.'”

While a smattering of coalition lawmakers have entertained the possibility of compromise — often in guarded, anonymous comments to the media — most have largely ignored calls by the opposition, President Isaac Herzog and others to negotiate over the contours of the overhaul plan.

“The fairy tales about ‘dialogue’ don’t convince anyone when they come from a criminal defendant held hostage by younger and more determined [coalition] partners,” opposition leader Yair Lapid tweeted in response to Netanyahu’s remarks, referring to the premier’s ongoing trial on graft charges.

“We won’t stop going out to demonstrate against the shattering of democracy in Israel,” Lapid added.

Incoming Prime Minister Benjamin Netanyahu (right) with incoming Justice Minister Yariv Levin in the Knesset on December 13, 2022. (Yonatan Sindel/Flash90)

As presented by 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.

Critics have staged a series of large protests saying the changes will gut the courts, leave minority rights unprotected and concentrate too much power in the hands of the ruling coalition. Proponents say the current system gives unelected judges and lawyers too much power over elected officials.

Opponents of the changes rallied Friday in Jerusalem where several hundred people took part in a protest convoy and demonstration.

Demonstrators drove from Latrun in the Ayalon Valley to the capital, where they held a rally outside the Supreme Court, vowing to defend it from plans to weaken its power and increase political influence.

Some demonstrators formed a human chain outside the Supreme Court “to protect” it.

Among the participants was former Likud justice minister Dan Meridor, who said protesters were fighting “for the core values of the state as written in the Declaration of Independence; a move… from an independent justice system to biased judges appointed by the ruler; from fighting corruption to removing all constraints.”

Meanwhile, 40 more economists — led by American Nobel Prize-winning economist Eric Maskin and Israel Prize recipient Menahem Yaari — signed a letter released earlier this week against the proposed overhaul, bringing the number of signatories to 310.

“The reform of the judicial system endangers the Israeli economy and may cause a drop in Israel’s credit rating, lead investors to flee and bring a brain drain,” they said. “Many studies have already proven that the concentration of vast political power in the hands of the ruling group without strong checks and balances could lead the country to economic decay.”

The letter, initially published Wednesday, has been signed by both right- and left-leaning senior academics, including Nobel Prize winner Prof. Daniel Kahneman and former Netanyahu economic adviser and National Economic Council head Prof. Eugene Kandel.

Tech workers block street to protest judicial overhaul, in Tel Aviv, on January 24, 2023 (Tomer Neuberg/Flash90)

Its release came a day after Bank of Israel Governor Amir Yaron reportedly outlined for Netanyahu the potential consequences of weakening the courts 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.

According to Israeli television reports, Yaron explicitly told Netanyahu that the shakeup would harm the economy.

A pair of Yaron’s successors, Karnit Flug and Jacob Frenkel, has also spoken out against the government’s plans, warning in an op-ed Sunday that it could negatively affect Israel’s credit rating and “deal a severe blow to the economy and its citizens,” a warning voiced by many workers in the tech sector.

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