Economists Warn of Fast and Furious Meltdown due to Judicial Overhaul2 min read
On Thursday, a fresh warning was issued by a group of 100 economists in Israel about the financial meltdown being faster and more powerful than initially predicted.
The economists penned an ‘emergency letter’ in which they cautioned that there could be grave implications of the far-reaching judicial overhaul plans of the government.
The second letter said that since they had published their first petition, they had come across growing indications that the economic damage could manifest faster and more powerfully than expected.
The letter said that the last few weeks had seen the first indications of capital flight, which is compelling the Bank of Israel to continue pushing up interest rates at a quicker pace.
The experts said that even if there is stability in the markets in the short term, research from the last couple of decades and experience from other countries that underwent such changes show that economic growth will be damaged in the long term and the standard of living will take a hit.
They stated that it was still not too late to put a stop to it. In recent weeks, the shekel has seen its value drop to the lowest in three years.
The Tel Aviv Stock Exchange has also underperformed and leading firms have also pulled their money from the country.
The signatories of the letters included both left and right-leaning senior academics, such as Prof. Daniel Kahneman, the Nobel Prize winner and a former adviser to the finance minister, Prof. Omer Moav.
Others included Prof. Eugene Kandel, the head of the National Economic Council and former economic adviser of Benjamin Netanyahu.
There was also the former Finance Ministry director, Prof. Avi Ben Bassat, and Prof. Manuel Trajtenberg, who has worked on several government positions.
Jacob Frenkel, the former governor of Bank of Israel for two terms, also signed the letter. In 2013, he had been appointed for another term by Benjamin Netanyahu.
However, he had withdrawn his candidacy after a scandal about attempted shoplifting in a duty free store at Hong Kong airport, which he claimed was a misunderstanding.
The second letter came a day after Israel’s A+ credit rating was affirmed by Fitch Ratings, stating that the outlook was stable due to the resilient and diversified economy.
But, it also added that the credit profile of the country could take a hit because of the judicial changes of the government.
Fitch said that institutional checks could weaken due to the judicial overhaul, which could result in negative investor sentiment and worse policy outcomes.
The controversial proposals have been prioritized by the hard-right coalition of Prime Minister Benjamin Netanyahu for transforming the justice system.
Even though there have been massive protests and former policymakers and leading economists have also spoken out against the overhaul, the government is moving ahead with the legislation.
There have not been any compromise talks either, as the opposition wants the government to stop the legislation, which the latter refuses to do.