Israel’s judicial ‘reforms’ will be ruinous for its economy

livemint.com:

civil servants with incompetent and corrupt lackeys, further sapping the economy of dynamism and innovation. The government’s plans thus amount to a time bomb, because rating agencies could soon see fit to downgrade Israel’s creditworthiness. If tech and other firms move abroad, the government’s revenue base will shrink, making the growing transfer payments to the ultra-orthodox unsustainable.

Over time, a deteriorating fiscal and public-debt outlook, combined with the erosion of the rule of law, will add to the current temptation to challenge the central bank’s independence, so that growing deficits can be monetized. If Israel heads down this road, the outcome will be predictable. Just look at autocratic Turkey, where inflation is expected to hit 58%.

All these factors will curtail growth, perhaps leading eventually to economic stagnation and even eventual recession. Those who suffer the most will very likely be the extremist poor who are clamouring for the government’s radical legal reforms. If the country’s stock market falls, interest-rate costs for the public and private sectors will increase, and a declining currency will fuel inflation, which is already rising.

Israel may well need some judicial reforms. But given the lack of a formal constitution, such changes would need to command the support of a large coalition of forces, not a narrow parliamentary majority that is controlled by extremist anti-democratic and theocratic parties. One hopes that Likud and its leader, Prime Minister Binyamin Netanyahu, will recognize that they are undermining not only Israel’s democracy, but also its economy, labour market, national wealth and security.