0 
0 The Israeli economy has suffered “a significant domestic shock” from the fight over the bitterly contested judicial overhaul pushed by Benjamin Netanyahu’s far-right government, the country’s central bank governor has said.
In a speech in Jerusalem on Tuesday, Amir Yaron said the controversy over the reform of the country’s judiciary, which sparked one of the biggest waves of protests in Israeli history, had damaged how markets perceived Israel’s economic stability.
“This does not mean that all of a sudden the world will stop trading with Israel. It also does not mean that we will not see significant investments in the Israeli economy,” he said, pointing to the recent announcement by chipmaker Nvidia saying it would build a supercomputer in Israel.
“But it does mean that continued uncertainty has significant economic costs. Therefore, the decision makers must restore certainty about the economy in Israel . . . To the extent that constitutional changes are made, they must maintain the strength and independence of the institutions.”
Netanyahu’s coalition government, which unites his Likud party with ultrareligious and extreme right factions, took power in December and made overhauling the judiciary a priority, unveiling a series of proposals that would radically weaken Israel’s top court.
Government officials argued that the changes — which included giving the coalition greater control over the appointment of judges and severely limiting the top court’s ability to strike down laws — were necessary to rein in activist judges who had used powers they were never formally granted to push a partisan, leftwing agenda.
But critics — who include former and serving security officials, former central bank chiefs, tech sector executives and the political opposition — saw the plans as a politically motivated power grab that would undermine checks and balances, pave the way for the evisceration of minority rights, foster corruption and damage the economy.
After months of protests, which culminated in a brief general strike in late March, Netanyahu backed down, and postponed the overhaul to allow for compromise talks between government and opposition representatives.
However, last week, after passing a two-year budget, he said that his coalition would return to the judicial overhaul — prompting warnings from opposition leaders that the protests would erupt again if the government abandoned attempts to find a compromise.
One of the most sensitive aspects of the compromise talks has centred on the panel that elects supreme court judges, where the coalition has proposed giving itself greater influence.
On Monday, a government official said the two representatives of parliament on the nine-strong panel would be chosen on June 14. Traditionally one of the parliamentary members has come from the opposition, but coalition officials have threatened to appoint two coalition lawmakers instead.
The remarks by Yaron, who has headed the Bank of Israel since 2018, are the latest in a series of warnings from the central bank about the potential economic impact of the government’s judicial plans.
Last month, it published forecasts suggesting that, if the dispute over the overhaul were not resolved smoothly, the fallout could knock an average of up to 2.8 per cent annually off economic output over the next three years.
