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The Economist: Reform poses risk to Israel’s economic strength

The Economist Intelligence Unit (EIU), an independent body within one of the world’s most prestigious news magazines, has warned, “There is serious concern that Israel is moving towards some of the patterns that we have seen in Hungary and Poland,” two countries that have fallen sharply in the rankings of the Democracy Index published by “The Economist” in recent years.

The EIU last week published its Democracy Index for 2022, which saw Israel fall six places in the rankings from 23rd to 29th, even before the new government introduced its plans to reform and weaken Israel’s judiciary.

The EIU told “Globes” that the fall in ranking in 2022 was due to the dissolution of the previous government, ‘which included an Arab party in the coalition for the first time,” while the Index does not yet take into account the current government’s plans for the judiciary and in other areas.

EIU analysts told “Globes,” “If the judicial reform is introduced, this will lower the scores that Israel receives in the field of law and civil society, checks and balances, and perhaps also transparency and in other measures that will be affected by the results of the reform.”

The EIU analysts added, “If the proposed legislation effectively eliminates the ability of Israel’s Supreme Court to review the Knesset’s legislation in cases where it contravenes Basic Laws, this will undermine the principle of separation of powers and potentially also the rights of citizens in Israel.”

Currently, Israel’s ranking is considered good in global terms: Despite slipping six places, Israel still stands 29th out of more than 160 countries ranked, but “further slippage is certainly likely if the current government continues to push ahead with its plans,” the EIU says.

EIU’s analysts raise concerns that the path that Israeli is taking will resemble the direction taken by Hungary and Poland in recent years – two countries that have faced criticism for adopting illiberal democratic models in which the judicial system and media have been weakened by the government.

EIU’s analysts add their concerns to those expressed in recent weeks by rating agencies and investment banks about the future of the Israeli economy as a result of implementing the judicial reform. The EIU analysts stress that they have already sent warnings to their clients regarding the “increased risk that currently exists in Israel.”

EIU’s analysts told “Globes,” “Some of the indicators that make up our Democracy Index are also taken into account in the EIU’s financial and operational assessments. We have already drawn attention to the consequences of the judicial reform on the situation in the markets, and the risk it will pose to Israel’s economic strength, and to an increased risk premium and therefore to higher loan costs for the government as well as consequences for business confidence in Israel and foreign investments in the country.”

Published by Globes, Israel business news – – on February 8, 2023.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.

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