Amid Judicial Reforms and Economic Turmoil: 4 Conflicts Threaten to Crash Netanyahu’s Coalition

As expected, last week the Israeli Parliament (the Knesset) approved, in a preliminary vote, two bills related to judicial reform, which the opposition describes as a judicial coup, which sparked controversy for weeks and caused demonstrations and strikes.

This measure came as an expression of the determination of Benjamin Netanyahu’s government to proceed with its plan despite the opposition of other political parties and the continuation of mass protests in the country, in addition to the American and international warnings, and the start of withdrawing billions of foreign investors.

Tens of thousands of Israelis demonstrate on a weekly basis against the right-wing government’s plan to reform the judiciary, while security warnings increase the possibility of carrying out political assassinations and riots against the backdrop of political tension inside the Israeli Occupation.

At a time when Netanyahu was defending his plan to reform the judiciary, his opponents saw that his plan aimed at weakening the judiciary and limiting the powers of the Supreme Court, thus freeing the government and the Knesset from judicial oversight.

Israeli experts fear that the right-wing majority in the Knesset will seek to control important sectors of Israeli institutions, such as the judiciary, especially after warnings that leaders of the religious right intend to infiltrate the army institution, with calls by National Security Minister Itamar Ben-Gvir to form the National Guard.

The shekel declined by 6% against the dollar at the end of last week, and according to Bank of Israel data, the shekel exchange rate reached 3.69 per dollar, which is the lowest price for the Israeli currency since March 2020, amid expectations of more severe economic turmoil.

In this context, many economists and prominent figures from tech companies and the banking sector have warned of the reluctance of investors and the flight of capital from “Israel,” but senior figures in the ruling coalition have played down the importance of this.

 

Reform Feud

The Times of Israel reported that the Knesset approved the first phase of legislation related to changing the method of selecting judges in “Israel” on February 20, 2023, noting that the final stage is expected to last for several months.

“Tens of thousands demonstrated in Jerusalem, in the vicinity of the Knesset, against the vote, before which the discussions were suspended, amid a boycott by a number of opposition deputies,” it pointed out.

Another contested provision of the judicial reform framework is the introduction of the exception clause that allows Parliament to overturn certain Supreme Court decisions by a simple majority of 61 votes out of the 120 MPs.

In the event that these judicial reforms, which require three readings, are approved, according to Hebrew media, they will be the most radical change in ruling system in “Israel,” which would limit the power of the Supreme Court (the highest judicial authority), give the right-wing government the power to choose judges, and end the Attorney General’s appointment of legal advisers to ministries.

This plan, if made into law, could make it easier for the government to legislate in favor of Jewish settlements in the West Bank without worrying about Supreme Court challenges.

Judicial reforms are a key program in Netanyahu’s right-wing government coalition, which took power in late December 2022.

A large part of public opinion moved against these judicial reforms, and about two months ago, every Saturday evening became the date for mass protests against the proposed plan.

In turn, on February 21, 2023, the United Nations High Commissioner for Human Rights, Volker Turk, called on “Israel” to suspend the two draft judicial reform bills for fear of their impact on human rights and the independence of the judiciary.

In the same context, the director of the Shin Bet, Ronen Bar, warned the leaders of the government coalition and the opposition of the explosion of the situation inside “Israel,” during separate talks he held with the leaders of the two teams, according to the Hebrew newspaper Haaretz.

This comes against the backdrop of demonstrations against the judicial reform plan promoted by Netanyahu’s coalition, in addition to the threats received by the Prime Minister and political leaders, which raises the concerns of the Israeli security regime.

The Hebrew Channel 12 also said that “Ronen Bar called the Minister of Justice Yariv Levin and the Minister of National Security Itamar Ben-Gvir, and demanded that they work to calm the situation following the demonstrations against Netanyahu’s coalition plan to reform the judiciary.”

It pointed out that “the conversation between the director of the Shin Bet and the two Israeli ministers comes against the backdrop of Netanyahu’s avoidance of dealing with the judicial plan, according to a decision by Attorney General Gali Baharav-Miara, to prevent conflicts of interest.”

 

Government Conflicts

On the other hand, conflicts are escalating within the Israeli government coalition led by Benjamin Netanyahu, threatening the possibility of its collapse, according to what the Hebrew Channel 12 reported in a report on February 16, 2023.

It stated that tensions are escalating between party leaders and senior ministers, although less than two months have passed since Netanyahu formed his government, pointing out that Netanyahu is experiencing 4 conflicts that threaten to crush his right-wing government coalition.

Led by Netanyahu, the coalition is made up of the ultra-nationalist Religious Zionism party, the far-right Jewish Power Party, the conservative Noam party, and two ultra-Orthodox Jewish parties.

According to Channel 12, the first of these conflicts relates to the special powers of the leader of the Religious Zionist Party, Bezalel Smotrich, in the Ministry of the Army, as the coalition agreements stipulate that he, along with the Ministry of Finance, assume the position of minister in the Ministry of the Army with special powers.

The report said that Netanyahu met Defense Minister Yoav Gallant and Smotrich earlier last week in separate meetings and discussed with them the issue of transferring the powers of the security administration and the coordinator of government activities in the Palestinian territories to the second minister in the Ministry of Defense.

It explained that Netanyahu sought to reassure Smotrich and confirm that he would hand over the powers of the Ministry of Defense to him, which were stipulated in the coalition agreement, without specifying when and how he would do so.

According to the report, Galant assured Netanyahu that any action by the Israeli army forces is considered security and therefore must remain under his sole authority, while Smotrich assured the prime minister that the evacuation of settlements in the West Bank is a civilian measure and one of his powers.

The Hebrew report added that this dispute over the issue of powers led to complaints and claims on the part of Smotrich towards Netanyahu, who realizes that this matter must be calmed down, referring to the possibility of the collapse of his coalition because of that.

As for the second conflict that threatens Netanyahu’s coalition, according to Channel 12, it concerns Minister of National Security Itamar Ben-Gvir, as Netanyahu’s approval of his plan regarding East Jerusalem has raised major reservations in the security establishment.

Last Friday, Ben-Gvir issued instructions to the Israeli police to prepare to launch Operation Defensive Shield 2 in east Jerusalem in response to the run-over operation carried out by a Palestinian from the Issawiya neighborhood, which resulted in the death and injury of two Israelis.

Officials in the security system attacked Ben-Gvir’s plan and emphasized that it was not linked to the armed operations of the Palestinians and the security tension in Jerusalem and that such an operation could have been implemented several years ago, the report added.

According to security officials, Ben-Gvir’s plan is based on attack, not defense, and may increase security tension. They are also not enthusiastic about the decisions issued by Netanyahu’s office, which focus on deploying additional forces in Jerusalem, the report continued.

Channel 12 confirmed that the third conflict is that there is a major crisis that broke out between Netanyahu and the most powerful man in his government, the Minister of Justice Yariv Levin, pointing out that this crisis is related to the differences between them over the method of promoting the controversial judicial reform plan.

The report indicated that the crisis reached the point of threatening Levin to the Prime Minister that he would submit his resignation and work to dissolve the government coalition in the event that there were major concessions in the judicial reform to the opponents of the plan.

The report added that, on the other hand, Netanyahu is disappointed with the way the judicial plan is being handled, especially the media coverage, continuing that those close to Netanyahu attacked Levin and claimed that he was pushing the country into the abyss for political reasons.

Although Netanyahu is very interested in passing the judicial reform plan, he finds it difficult to deal with the issue in a strict manner and without any room for maneuver, the report added.

According to the Hebrew report, Netanyahu is ready for any settlement, but he does not want the collapse of his coalition or Levin’s resignation.

As for the fourth conflict that Netanyahu’s coalition is witnessing, it concerns the United Torah Judaism party chairman Moshe Gafni who opposed Netanyahu’s decision related to postponing the vote on laws on the judicial reform plan before the Knesset plenary.

On February 15, Netanyahu and his government coalition decided to postpone voting on laws on the judicial plan for the following week, with the aim of allowing for negotiations with the Israeli opposition within the framework of Israeli President Isaac Herzog’s initiative.

The report stated that Gafni refuses to negotiate with the Israeli opposition parties on a compromise on the judicial plan and insists on passing a bill that would withdraw the power to object to Knesset laws and government decisions from the Supreme Court.

The report pointed out that Gafni threatened in closed talks to withdraw from the Netanyahu government if the bill was not passed, noting that the religious parties in Netanyahu’s government have a strong interest in passing this bill for ideological purposes.

 

Economic Effects

The crisis of the so-called judicial reforms of the Netanyahu government is not limited to the legal issue only but extends to other sectors, including the economy.

An official in the S&P Global Ratings company warned that the credit rating of “Israel” might be damaged if the amendments to the judiciary were actually made.

Maxim Rybnikov, director at S&P Global Ratings, said that the damage to the credit rating would be due to the fact that investors will not be able to know whether the money they direct to “Israel” is safe or not because there will be no party that would restrict and regulate the behavior of the Netanyahu government, as reported by CTech website last month.

On its part, Globes newspaper reported that Netanyahu had a phone call with Martin Wolf, a commentator for the Financial Times, who is described as the most influential economic commentator in the world, in an attempt to recruit him to persuade foreign investors not to leave “Israel.”

In its report published on February 19, 2023, the newspaper pointed out that Netanyahu did not succeed in convincing Wolf, who confirmed that judicial reforms would negatively affect the investment environment in “Israel.”

This was not limited to Wolf, as Martin Eichenbaum, professor of economics at the Americana Northwestern group, predicted that judicial reforms would lead to the flight of foreign investors.

The testimony of Eichenbaum, a Jew, is of exceptional importance, as The Marker newspaper indicated in its recent issue that Netanyahu had previously suggested that he takes over as the governor of the Bank of Israel because of his deep confidence in his abilities in the economic and monetary field.

According to the newspaper, on February 13, 2023, at least five tech companies worth about $8 billion in the past days withdrew their money from “Israel,” in reference to the depth of their concern about the negative effects of the government’s plans on the future of industries, the economy and the financial market in “Israel.”

The Times of Israel also reported that all Israeli bank managers met with the Israeli Finance Minister on February 15, 2023, and warned him of the dangers of judicial changes, which the government is seeking, to the Israeli economy.

Meanwhile, dozens of prominent economic figures wrote a letter to Netanyahu last week urging him to conduct negotiations on the proposals, offering an alternative framework for reform.

Also on February 8, 2023, about 56 leading economists at American universities wrote an open letter to Netanyahu warning him that judicial reforms would be detrimental to economic growth, The Times of Israel reported.

Earlier this February, the American Institute of Finance warned JPMorgan about the increasing risks of investing in “Israel” due to the far-reaching plans of the Whig government.

“There is no link between the justice system reforms and any blow to Israel’s economy. Any attempt to link the two matters is politicized,” Knesset Finance Committee chairman and United Torah Judaism chairman Moshe Gafni told Reuters on February 21, 2023.