A group of former officials in the Finance Ministry called on Sunday on Finance Minister Bezalel Smotrich to halt the government’s controversial judicial overhaul, saying it would “severely and irreversibly damage the Israeli economy.”
The signatories to the letter previously worked in the ministry’s Budgets Department, which operates across the government to prepare the national spending plan.
“We anticipate severe damage to the Israeli economy, with the first indications already visible today,” the former officials warned.
“The implication of the reform on the Israeli economy will manifest itself, among other things, in a flight of capital abroad, a loss of trust among local and foreign investors, a devaluation of the shekel, an increase of inflation, a downgrade of the credit rating (as Fitch and Moody’s warned just a few days ago), an increase in interest payments, and a hampering of economic growth,” they wrote.
Last week, the Moody’s rating agency said the government’s proposals could weaken the country’s institutional strength and negatively affect its economic outlook. Before that, Fitch cautioned that the judicial overhaul could weaken institutional checks, leading to “worse policy outcomes or sustained negative investor sentiment.”
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The agencies’ warning were further signals from the business community that the government’s plans may hamper continued investment in the country, with some investors and firms already curtailing or completely freezing the flow of money into Israel.
Finance Minister Bezalel Smotrich at a press conference in Tel Aviv, March 2, 2023. (Avshalom Sassoni/Flash90)
The signatories to the letter wrote that this would lead to a fall in state revenues, which would in turn require government expenditure cuts that “will cause profound damage to the social and economy welfare.
“We anticipate that social objectives such as the reduction of poverty and the building of employment security, healthcare and education will be adversely affected. The economy’s growth potential will not be realized and necessary investments in infrastructure will be postponed,” they charged.
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“Without a strong, stable, and independent judicial system, it will not be possible to uphold the principles of a free, efficient, competitive, equitable and growing economy,” the letter read, noting that there would no longer be a guarantee of protection for property rights and individual freedoms, or safeguards against political and governmental corruption.
“Without safeguarding the independent and effective judicial review on the actions of the government and Knesset, it will not be possible to guarantee the efficient, equitable and just allocation of resources in the economy,” the former officials warned.
The letter said that foreign investors “seek strong and independent judicial systems as an essential prerequisite for their investment,” meaning that there could be a rapid movement of capital out of the country as well as a risk to future cashflow into Israel.
The signatories said that while the “erosion of the resilience of the Israeli economy has already begun,” the process could be reversed if the overhaul were to be stopped immediately.
An aerial picture shows a protest in Tel Aviv against the government’s controversial judicial overhaul legislation, March 11, 2023. (Jack Guez/AFP)
The former officials who signed on to the letter noted that their warning was “extremely unusual, probably without precedent,” but said this showed the fact that the “Israeli economy is entering an increased danger zone.”
“We fear this change will cause irreversible damage to the Israeli economy and the texture of the society in Israel,” the letter read, noting that while outdated systems do need reform, the changes need to be discussed and negotiated.
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“No reform, especially a reform that addresses the fundamentals of governance and the balance between the branches of government, can be carried out in such an extreme manner by exploiting a political opportunity, without adequate examination and without achieving a broad consensus,” the signatories said.
The letter concluded with a plea to Smotrich personally, asking him to stop the reform and noting that “responsibility for the effects of the reform on the Israeli economy are solely yours.”
The legislative plans by the right-religious government, Israel’s most hardline to date, have sparked mass public protests for over two months, as well as fierce backlash from opposition politicians and dire warnings from economists, business leaders, legal experts and security officials.
Former US Federal Reserve chairman Ben Bernanke warned that the planned overhaul would “cause tremendous damage,” in quotes aired by Channel 13 news on Saturday. “Israel needs to build a consensus regarding any significant change in the legal system,” Bernanke told the network.
Former US Federal Reserve Chair Ben Bernanke speaks at the Brookings Institution, October 10, 2022, in Washington. (AP Photo/Alex Brandon)
The report did not provide Bernanke’s comments in English, only airing text quotes of his statements translated into Hebrew.
“Israel is a small and open economy that depends on international trade and international investments for economic growth and prosperity,” Bernanke reportedly said. “There will be tremendous damage to the security of foreign investors, trading partners, and Israeli entrepreneurs as a result of sudden institutional changes that will increase uncertainty, create new legal and political risks, and jeopardize the rights of minorities.
“To ensure that Israel’s extraordinary economic success continues, Israel needs to move slowly and build a broad consensus regarding any significant change in its legal system or form of government,” he added.
Bernanke, who was awarded the 2022 Nobel Memorial Prize in Economic Sciences, served as Federal Reserve chairman during the 2008 financial crisis.
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Last week, former US Treasury secretary Lawrence Summers said that Israel was “walking too close to a ledge” with the government’s proposed judicial overhaul.
Summers’ comments came hours after Israeli tech unicorn Riskified announced that it would be moving $500 million out of the country and offering relocation packages to some interested workers.
Tech workers march in Tel Aviv to protest against the government’s planned overhaul of the judicial system, January 31, 2023. (Tomer Neuberg/Flash90 )
Last month, Tom Livne, the founder of another of Israel’s most successful tech unicorns — Verbit — declared that he was leaving the country and ceasing to pay taxes in protest over the new hardline government’s planned judicial overhaul.
Livne, whose hybrid AI-based and human transcription and captioning software company was valued at $2 billion in its last funding round in late 2021, said that he encouraged other prominent tech executives to follow his lead.
Israeli cybersecurity startup Wiz, which raised $300 million at a $10 billion valuation in its latest private funding round, said last month that the capital will not be invested in Israel given the uncertainty around the country’s judiciary system.
A group of hundreds of Israeli economists issued a fresh warning earlier this month that a financial meltdown could occur even more “powerfully and faster” than they had originally forecast when they penned an “emergency letter” cautioning that the far-reaching judicial shakeup being advanced by the government could have grave implications.
Critics of the government’s plan say it will weaken Israel’s democratic character, remove a key element of its checks and balances and leave minorities unprotected. Supporters have called it a much-needed reform to rein in an “activist” court.
A number of polls have indicated the legislation is broadly unpopular with the public.
OTTAWA – Finance Minister Chrystia Freeland says the government is making some changes to mortgage rules to help more Canadians to purchase their first home.
She says the changes will come into force in December and better reflect the housing market.
The price cap for insured mortgages will be boosted for the first time since 2012, moving to $1.5 million from $1 million, to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
On Aug. 1 eligibility for the 30-year amortization was changed to include first-time buyers purchasing a newly-built home.
Justice Minister Arif Virani is also releasing drafts for a bill of rights for renters as well as one for homebuyers, both of which the government promised five months ago.
Virani says the government intends to work with provinces to prevent practices like renovictions, where landowners evict tenants and make minimal renovations and then seek higher rents.
The government touts today’s announced measures as the “boldest mortgage reforms in decades,” and it comes after a year of criticism over high housing costs.
The Liberals have been slumping in the polls for months, including among younger adults who say not being able to afford a house is one of their key concerns.
This report by The Canadian Press was first published Sept. 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales rose 1.4 per cent to $71 billion in July, helped by higher sales in the petroleum and coal and chemical product subsectors.
The increase followed a 1.7 per cent decrease in June.
The agency says sales in the petroleum and coal product subsector gained 6.7 per cent to total $8.6 billion in July as most refineries sold more, helped by higher prices and demand.
Chemical product sales rose 5.3 per cent to $5.6 billion in July, boosted by increased sales of pharmaceutical and medicine products.
Sales of wood products fell 4.8 per cent for the month to $2.9 billion, the lowest level since May 2023.
In constant dollar terms, overall manufacturing sales rose 0.9 per cent in July.
This report by The Canadian Press was first published Sept. 16, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
