Israel’s Judicial Crisis Fast Becoming an Economic Concern

 

Israeli financial technology firm Riskified is transferring $500 million out of the country, local media reported on Wednesday.

The news by financial news website Calcalist revealed the news, which follows reports that billions of dollars have flowed out of the economy because of growing private sector opposition to the Netanyahu government’s plan to overhaul the judicial system.

Times of Israel reported on February 15 that bank officials suspected $4 billion had been moved out of the country in recent weeks, with companies shifting assets to foreign accounts because of the government’s plans to “shackle the judiciary”.

Calcalist quoted a letter to employees at Riskified from its CEO, citing concerns about the government’s proposed changes and the negative impact they may have on the economy.

Officials at Riskified, which now appears to be expanding an office in Lisbon, were not available for immediate comment.

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Moody’s warning on judicial overhaul

The judicial overhaul plan, which has already received initial parliamentary approval, would give the government greater sway on selecting judges and limit the power of the Supreme Court to strike down legislation.

Moody’s Investor Service warned on Tuesday that the planned judicial overhaul could weaken institutions and negatively impact Israel’s sovereign credit profile.

In its statement, Moody’s did not downgrade Israel’s A1 positive credit rating and did not walk back the positive outlook it assigned in April 2022 that was driven by solid government finances.

But Moody’s warned: “There could arguably be downward pressure on those scores” if the government fully passed the judicial overhaul.

Haaretz noted the ratings agency’s unusual warning, that if the judicial overhaul is implemented in full, the proposed changes could “materially weaken the strength of the judiciary and as such be credit negative.”

The warning said the planned changes could “pose longer-term risks for Israel’s economic prospects, particularly capital inflows into the important high-tech sector,” it said.

A number of other high-profile companies in Israel have already said they would be transferring large sums of money abroad due to the political uncertainty.

Critics of the planned law changes say Netanyahu – on trial on graft charges that he denies – is pursuing steps that will hurt Israel’s democratic checks and balances, enable corruption and bring diplomatic isolation.

Proponents say the changes are needed to curb what they deem an activist judiciary that interferes in politics.

 

• Reuters with additional reporting and editing by Jim Pollard

 

NOTE: This report was updated on March 8, 2023 to add further details (about the Moody’s warning).

 

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