Netanyahu: ‘Those sowing hysteria of economic downfall will be proven wrong’

Prime Minister Benjamin Netanyahu on Thursday waved off growing warnings that his government’s planned judicial overhaul will harm the Israeli economy, claiming those making such statements are politically motivated.

“There are those who are trying to undermine the Israeli economy and who are trying to create hysteria for political reasons, a hysteria that has no bearing on reality,” Netanyahu said in remarks to the press ahead of a cabinet meeting to discuss the 2023-2024 budget. “The Israeli economy is strong and it will continue to strengthen, thanks to our strength, thanks to the independence of the Bank of Israel, which will be maintained, and thanks to the responsible economic policy and to the initiatives that we are leading.”

The emphasis on the Bank of Israel’s independence appeared to be in reference to the media storm created by Foreign Minister Eli Cohen earlier in the week, when he criticized the bank’s decision to further raise its key lending rate, drawing pushback from Netanyahu and Finance Minister Bezalel Smotrich.

The incident came as the list of economists — both in and out of government — expressing their concern over the judicial overhaul’s potential to harm Israel’s financial standing continued to grow.

The Finance Ministry’s own chief economist Shira Greenberg issued an official warning in the risks chapter of the 2024-2027 budget forecast. “To the extent that the judicial reform is perceived by the market as damaging the strength and independence of state institutions in addition to increasing uncertainty in the investment environment, this may harm economic activity and private investments in particular,” she wrote in a report published Thursday.

Former Bank of Israel chief and JP Morgan Chase International chair Jacob Frenkel said Wednesday that the government’s efforts to weaken the judiciary could leave the economy in shambles and dismissed the current attempts by the coalition to calm the mounting economic concerns as “an insult to people’s intelligence.”

Former Bank of Israel governor Jacob Frenkel speaks to Channel 12, January 22, 2023. (Video screenshot; used in accordance with Clause 27a of the Copyright Law)

“It should worry us very much,” Frenkel told Channel 12 news when asked about the weakening of the Israeli shekel, which over the past month has lost almost 10 percent of its value relative to the US dollar.

“The [value of the] shekel is a reflection of the reality behind it. We have a situation of total uncertainty — economic uncertainty, political uncertainty and institutional uncertainty, which affects all components of the economy: Consumers, manufacturers, investors, the ordinary citizen,” he said. “And this uncertainty is homemade, it isn’t an external shock.”

Netanyahu told cabinet members on Thursday that “those who are sowing hysteria and fear will be proven wrong.”

He hailed the country’s roughly one percent deficit, saying it is a “good sign of what is to come.”

National Security Minister Itamar Ben Gvir at the annual Jerusalem Conference of the ‘Besheva’ group in Jerusalem, on February 21, 2023. (Yonatan Sindel/Flash90)

Several sections of the proposed budget are still under dispute, including far-right National Security Minister Itamar Ben Gvir’s demand to significantly expand funding for the police by NIS 14 billion ($3.85 billion). With the matter unresolved, Ben Gvir decided not to attend Thursday’s meeting. Netanyahu had not been aware of his absence and made a point of praising the minister before realizing that he wasn’t in the room.

Netanyahu noted that the police budget was already being expanded to allow for new police stations, the recruitment of more police officers and the establishment of a national guard.

Thursday’s meeting came after Netanyahu, Smotrich, Defense Minister Yoav Gallant and IDF Chief of Staff Herzi Halevi met late Wednesday and reached an agreement on a multi-year defense budget. The sum would be included in the 2023-2024 state budget, which needs to be approved by May 28, six months after the government was sworn in.

Channel 12 news, without citing a source, said the budget would amount to NIS 68 billion ($18.8 billion).

During Thursday’s meeting, Netanyahu again raised a plan — which he pledged during the election — to provide free education to all Israelis up to three years old. The plan is opposed by the Finance Ministry due to its high costs, but the prime minister said he was determined to see it through and that it would be included in the budget.