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 – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
