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Former Bank of Israel governors: ‘Judicial reforms could harm Israel’s economy’

Two former Bank of Israel governors released a joint op-ed on Sunday, writing that Israel’s credit rating could fall and its overall economy suffer “a severe blow” from judicial reforms under consideration by the Israeli government.

Karnit Flug and Jacob Frenkel warned that the proposed reforms, which would considerably limit the powers of Israel’s High Court of Justice, would weaken the judiciary system, making foreign investors less likely to invest in Israel. 

It would also become more costly for the Israeli government to raise funds due to a possible downgrading of Israel’s credit rating, they wrote in the Israeli daily Yedioth Ahronoth. 

Flug and Frenkel join a chorus of criticism against the government, which, in recent weeks have included former judges, senior executives in the high-tech industry and money managers.

The two former bankers named Turkey, Hungary and Poland as countries whose judicial reforms led to a weakened system of checks and balances, thereby undermining their credit ratings and leading to a decrease in foreign investments. 

“Israel’s situation is still far from that of countries like Hungary and Poland, and its situation is immeasurably better than that of Turkey, but it is important to understand that there is a connection between seemingly unrelated processes, such as the judiciary’s ability to criticize the government and trust in the economy, which affects economic performance,” Flug and Frenkel wrote. “The proposed moves to weaken judicial review increase the risk of a harsh and painful reaction.”

The former governors made a point of stressing that “the strength, professionalism and independence of the judicial system is a central factor determining the Israeli economy’s status in the global economy.” 

“In the modern world, economic growth and prosperity necessitate stability … and clear and stable rules of the game that allow a long-term planning horizon,” according to their op-ed.

The All Israel News Staff is a team of journalists in Israel.

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