In Israel, the financial sector is in turmoil.

While Israeli Prime Minister Benjamin Netanyahu is on an official visit to France on Thursday, February 2, analysts from Israeli investment companies, entrepreneurs and financial players are stepping up to the plate and, unusually, getting involved in politics.

Everyone fears that the controversial reforms introduced by the far-right government will scare away investors and upset the economy.  

In their line of sight, the reform of the High Court of Justice, presented on January 5th.

Widely denounced in Israel as a threat to the rule of law, it intends to limit the powers of the country's highest judicial body.

Divided into four parts, the measure aims in particular to reduce the control currently exercised by this Court over the laws adopted by Parliament and to modify the methods of appointment of judges and advisers within the ministries.  

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Concern of bank managers 

For a month, the government has remained deaf to the massive demonstrations organized each week, some of them by employees of the tech sector.

But these received unexpected support: last week, the governor of the Israeli central bank, Amir Yaron, according to the Israeli media, urged Benjamin Netanyahu to be cautious, fearing that a decline in democracy in Israel would drive away foreign investors.

Following him, several bank managers expressed their concerns.

"You need to stop immediately and move forward with changes only with caution and consensus," Discount Bank CEO Uri Levin said. "Maybe we're wrong and you're right, but the price of a mistake could be fatal for democracy and the economy." 

Moshe Hazan, a senior official at the Bank of Israel, even resigned with a bang, saying he could not stay in his post "while Israeli democracy is in danger."  

The argument hits the mark, both by its rarity and by its authors: it is difficult to accuse the Israeli economic elite of "leftism", as Benjamin Netanyahu likes to do to discredit his opponents.

"This is the only argument Netanyahu can be sensitive to" 

"Generally, the debates in Israel revolve around the risk of diplomatic isolation and tensions with the diaspora. This is the first time that the link between democracy and economic benefits has been highlighted. I think it's the only argument Netanyahu can be sensitive to, analyzes Denis Charbit, professor of political science at the Open University of Israel. He makes fun of the 100,000 people who demonstrate every Saturday. But the position taken by the economic elites carries weight any further."  

Unheard of in Israel, an “emergency letter” was thus signed on January 25 by more than three hundred economists – academics and Nobel laureates, but also advisers to the Ministry of Finance, budget officers and governors of central banks.

These leading players, usually reluctant to take a position in politics, warn of the economic risk represented by the judicial reforms carried out by the government.  

"Over the last twenty years, observes Denis Charbit, all the research shows that the transition from a liberal democracy to an illiberal regime, as in Turkey, Hungary or Poland, for example, has resulted in a drop in investment This is what the actors of the Israeli economy fear, and this is the main argument they put forward." 

Escape of the unicorns 

This is all the more so as foreign investment in Israel is already being put to the test due to the insecurity reigning in the country and the boycott campaigns condemning the occupation of the Palestinian Territories.

"To add the risk of a loss of independence of justice could be the straw, continues Denis Charbit. No one knows if this will actually happen, but the threat is enough to panic."  

Leaders of unicorns, these start-ups listed on the stock market at more than a billion dollars, have thus announced their intention to go into exile and withdraw their investments from the country if the reform is adopted.

On Tuesday, Tom Livne, CEO of Israeli unicorn Verbit, urged tech executives to follow his lead and leave Israel to stop paying taxes there.

Papaya Global, another Tel Aviv-based unicorn, meanwhile said it was withdrawing all investments from Israel. 

Faced with the risk of a snowball effect, Nir Barkat, the Minister of the Economy, opened the door to negotiations for the first time on Wednesday, saying: "I am in favor of the discussion, but let's not mix politics and economics."

Not sure, however, that this is enough to calm the spirits.  

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