Israel economy to benefit from judicial reforms, finance minister says

Jerusalem (Reuters) – Israeli Finance Minister Bezalel Smotrich said on Tuesday he saw the country’s economy being strengthened by the government’s proposed judicial overhaul, but that he would assume responsibility for any economic harm caused by it.

He described the fury over the proposals, which include weekly mass protests and warnings from leaders in the private sector, as a political event that the government is “managing”.

“There is a sort of a jolt in the Israeli public, this is being reflected in certain vectors in the economy. I don’t see a catastrophe,” Smotrich said at a news conference to provide details of the 2023-24 state budget.

“There is no judicial coup,” he said using a phrase coined by opposition lawmakers. “The correction we are bringing will strengthen the State of Israel.”

“I unequivocally take responsibility on this,” he added.

The shekel has slumped 8% versus the dollar, reaching a 3-year low, since last month’s proposals to give the government greater sway on selecting judges and limit the power of the Supreme Court to strike down legislation. It was down 0.1% against the U.S. currency at a 3.665 rate late on Tuesday.

The depreciation has alarmed investors wary that Israel might be joining the growing list of emerging markets taking a more authoritarian stance to decision making.

Asked whether the shekel’s weakness was connected to the government’s judicial plans, he said: “I don’t know,” and added there may be a number of factors at play.

He added that passing a two-year budget was an important step in projecting economic certainty.

The cabinet on Friday approved the 2023-24 state budget draft that the Finance Ministry expects will be fully ratified by the end of May. The budget allocates spending of 484.8 billion shekels ($132 billion) this year and 513.7 billion next year.

The ministry has set budget deficits of 0.9% and 0.8% of gross domestic product, respectively, up from a 0.6% surplus in 2022.

Critics of the planned law changes say Prime Minister Benjamin 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.