On Saturday night in Netanya, a city located on the coast plain of Israel between Tel Aviv and Haifa, Tali Gotliv – a minister of Bibi Netanyahu’s government – accused their opponents of being traitors.

Hmmm! It is less than 30 years ago, when Netanyahu was the leader of the Parliamentary opposition. He blamed the Prime Minister of the time, Yitzhak Rabin, for treachery. Weeks later, Rabin was assasinated.

Gotliv’s remarks drew the anger of many.

Who are you calling a traitor? Is it my father, who volunteered to fight in ’48?My grandparents, who financially helped build this country? My father-in-law, who did everything to make Aliyah, including being a stowaway, lying about his age, and enlisting in the army, and fought in wars for over 30 years? My mother-in-law who folded parachutes, her sisters, and her brother who all served? The uncle who proudly wears paratrooper’s wings with a red backing? My husband, who served and fought in both Lebanon wars and every “war” after, and volunteered for miluim until he was 50? My nephew with special needs, who all he wanted to do is join Zahal and is now proudly wearing a uniform? Or my daughter, who serves on the Lebanese border as the “eyes of the country”? We are traitors?

MK Tali Gotlieb, you are an embarrassment to the Knesset and to this country.

Shari Wright Pilo posted on Facebook:

The following day, Sunday, was the first full day back after the Passover holiday break

  • The Minister of Finance accused Moody’s of not understanding how economies work, after the agency warned that Israel’s credit status may well be downgraded.
  • It has emerged that Yair Netanyahu, the PM’s son, is on a luxurious holiday in the USA, openly financed by the taxpayer and accompanied by a security entourage.
  • And yet another opinion poll revealed that the decline in the government’s support continues to gather pace. I assume that means from the perspective of Gotliv that the number of traitors in Israel is growing alarmingly!

There is a central organising committee for these protests. One of its main proponents is a former chief of staff and one-time ally of Netanyahu, Moshe Ayalon. His team clearly has access to money. In parallel, there are many local neighbourhood groups emerging spontaneously. I even heard of one of them being called “Grandmothers for Democracy”.

Not by chance, this group was also active in Netanya . Gotliv was accompanied by other top officials, including the Minister of State Security, Itamar Ben Gvir. They addressed around about 500 people. However, their opponents numbered closer to 35,000.

The opponents of the Israeli governments plans can be found in most sections of society. Evidently, the numbers have yet to peak. Few of them hide their views. Gotliv’s shouting does not seem to create for her significant levels of support. Meanwhile, her boss, the PM himself, does not seem to exude the control of previous years. One news station reported him bringing back a behind-the-scenes advisor, previously disgraced by the submarine corruption scandal.

This is a government, driven by a mission convulsed by controversy, and which sees its opponents as enemies of the state. The problem for those at the top is that those underneath them are for now flocking to the devil of the enemy.

It is Tuesday 11th April.

In the Holy Land, the Christians have finished celebrating Easter. For Muslims, the month of fasting over Ramadan is approaching its end. And Jews are in the middle of the festival of Passover, usually a time of happiness.

However, the incessant terror attacks that have led 18 people dead since early January is taking its toll. The latest incident saw the slaughter of three members of a British-Israeli family. They were identified as Jews, driving in the wrong area at the wrong time.

Last night, the Israeli Prime Minister, Bibi Netanyahu, addressed the nation. He had an opportunity to unite. He had a platform to motivate a nation, wounded by discord over his policies and the bullets of terrorists. In a televised address, which I did not watch, the PM attributed these murderous acts to the protest movement against his attempts to reform the judiciary. And he went on to mock the opposition for their achievements when in power last year.

In other words, Netanyahu blamed the deaths on his political opponents.

These opponents include:

  • Most previous chiefs-of-staff, leaders of the Mossad, and the police force.
  • Most former judges of the High Court.
  • Most leading economists
  • Political leaders in Germany, the UK, France and the USA – to name a few.
  • And………….. well the list is long. But let us just say that of the hundreds of thousands that have protested on the streets of the country over the past three months, the numbers include members of my family. As far as I know, our only criminal act to date has been a driving fine or two.

So what is Bibi saying to me? Is he really accusing me of plotting and financing the murder of innocents? Obviously not. I assuming he is trying to capture some form of domestic political initiative.

After all, according to all political opinion polls, if an election were held today, the ruling coalition would be left in the gutter. In fact, the numbers are so bad that the Netanyahu’s Likud party would no lose its premier status in the Kenesset, a position that it has held for over a decade.

Netanyahu can blame whoever he wants. I don’t care.

However, by attempting to deflect the blame on to others, Netanyahu is admitting that he cannot and will not take responsibility. Responsibility for what?

  • The worsening internal security situation
  • The worsening defense situation on the northern and Gaza borders
  • Direct investment form overseas that is drying up.
  • His capitulation to his Minister of Internal Security that has demanded funding for a new police force under his personal control.
  • And much more.

Bibi – you want me to accept the blame? Who gives a damn, except your inner cabal, who probably does not even know how much a carton of milk costs.

But leadership requires responsibility, and you can’t take that. You don’t have it any more.

Go home to your luxurious villa. Go, now!

Israel’s Minister of Finance, Bezalel Smotrich, is convinced that the proposed reforms of the judiciary will strengthen the Israeli economy.

Smotrich has no known significant experience in running finances. His recent trip to America was boycotted by most top financiers and all government officials. He has also called for an Arab town to be destroyed.

The good news is that Smotrich has finally pushed through one policy change. A tax on sugar-rich soft drinks from this coming week will be lowered! And last week, nearly six months after his coalition won the general election, he presented his budget to the Kenesset, presumedly based on revenues that are going to keep flowing in as a result of the proposed reforms.

Well, maybe.

You see, it is not that the concept of Israel’s Start-Up Nation has ground to a halt. However, the reports of overseas investment into the country are simply very thin. Negligible may be an exaggeration, but they are very difficult to pick out and see.

And as most of the big bucks in the past decade has come from the USA, Netanyahu’s spat with the White House is unlikely to help matters.

In fact, the White House shunning of Israel’s PM was the core of what seems to have been a really bad week for Netanyahu. If we go back 8 days, he celebrated last Friday night and the incoming of the Jewish Sabbath in London at a restaurant that can hardly be described as kosher. He and his wife were caught on camera, smiling away. And then: –

  • On Saturday night, his own Minister of Defense, Yoav Gallant, called for a halt in the reform legislation. This proposal was made publicly and came as Netanyahu was returning from Britain.
  • Netanyahu then sacked his former close ally. This move brought tens of thousands of demonstrators onto the streets, more or less spontaneously.
  • Netanyahu has now backed down, at least temporarily. The reform was pulled. Talks aimed at compromise have started, although few have expressed optimism.
  • There is now a creeping fear in Netanyahu’s Likud party that they do not have the votes to carry the legislation.
  • On Thursday, it emerged that Netanyahu’s legal team are considering mediation in the several proceedings against their client. What is interesting here is that the man has always denied all the charges against him.
  • And finally, Yair Netanyahu, the PM’s son, was ordered to pay 40,000 shekel and legal costs to a former opposition politician, who had filed a claim against him.

The Passover holiday season is closing in. The shekel is still showing signs of weakness. The ultraorthodox Haredi parties are showing signs of backing away from full support of Netanyahu. As I write, over 200,000 people throughout the country are protesting – for the 13th week in a row – against the reforms.

And Smotrich has yet to inform the citizens why these reforms will be so wonderful for the shekel in their pockets!

Have a good week. And maybe Smotrich and Netanyahu will do so as well.

Israel’s Prime Minister, Bibi Netanyahu had a distinguished military career, ending up with the rank of captain in a crack unit. Two days ago, he fired his Minister of Defense, Yoav Galant, an ex-General and considered until recently a strong loyalist of his boss.

The streets of Jerusalem, Tel Aviv and dozens of other places erupted. The trades unions and the employers and cinema owners and venture capital groups and banks and……….. shut up shop. Last night, the Prime Minister was forced to announce that – at least temporarily – he has halted his attempts to reform (castrate?) Israel’s judicial system.

It is 12 weeks since this latest Netanyahu government was sworn in. In that time, we have seen violent political debates, foreign direct investment collapse, huge funds leave the country, a series of ‘misunderstandings’ with the USA, and an inability to tackle a worsening security situation.

To give some perspective, here are 6 points for your consideration.

  1. The attempts at judicial change have been prioritised and look destined to continue. In these 3 months, little other legislation has been passed. One exception is the law that now allows politicians to accept large donations. I will let my readers consider why the opposition considers this a giant step towards the legitimisation of corruption. I should also mention that a law to restrict the movement of violent husbands was thrown out by the party of the Minister of Police!
  2. Ostensibly, Bibi fired Galant because he did not tackle the issue of senior reserve soldiers and air force teams, who are now refusing to turn up for duty. As my wife recalled, it is barely 20 years ago, when supporters of Bibi refused to take part in the operations to return Gush Katif to the Palestinians for political reasons.
  3. As Bibi made his speech placing the legislation to one side, for the first time a large demonstration took place of those supporting his policies. He acknowledged them and thanked them in his speech. Mr. PM – I urge you to look again. Those protesters were primarily young, orthodox Jews, who do not vote for you but for your coalition allies. Your Likud party’s supporters were not to be seen (by the television cameras). Is it any wonder that your popularity has been decimated in polls in the past month?
  4. Bibi and his colleagues have concentrated on reforms of the High Court of Justice. As one very observant female pointed out, why do they not also mention the need to reform the rabbinical courts? Is that to do with the fact that Bibi’s coalition allies will not allow the subject even to be mentioned?
  5. I referred to a shift in the polls. That shift is probably the most significant movement seen in the country since the mid 1970s. In May 1977, the Likud’s predecessor under Menachem Begin came to power for the first time, as the socialists were seen as tired, corrupt and incompetent. (sic!)
  6. Just before making his speech, Bibi had to shore up his coalition. The last man holding out was Ben Gvir, the Minister of Internal Security. This is a man on the far right of the political spectrum – far right in all the meaning of the term. He has his own extensive police record and was not allowed to serve in the army. Ben Gvir demanded from Bibi and received permission to create a new security force, under his personal command – separate from the police and army! I comment no further.

And where are we today, less than 3 days after Galant made his speech to the country which prompted his sacking?

Galant had demanded that the security cabinet be convened because there is a huge problem on the horizon and the national political debate is threatening the army’s ability to operate. Bibi has refused. Galant spoke out, placing the security of the nation before the needs of his Likud party and before those of his PM. He was told that he was fired.

The country erupted. Bibi’s strategy completely back fired. Bibi backtracked, at least for now. Our military hero had shot himself in the foot!

And yet:

A) Whatever is that security situation, it still exists.

B) Meanwhile, Galant has yet to receive his formal letter of dismissal.

C) Israel – that is surrounded by existential threats – does not know if it has or has not an appointed Minister of Defense!!!!!!!!

Do you get the feeling that this is a PM who has ‘lost it’?

Simon Sinek is one of the western world’s most prolific influencers. Still don’t know about him? Choose any social media platform and he is out there.

In a recent podcast with Steven Bartlett, Sinek observed that people put on uniform to serve in armies, whether or not they like or love their leaders at the time. Why? Why will they risk their lives?

Because each soldier on the line TRUSTS in the commanders back home – generals and politicians.

How does this relate back to what is happening in Israel today? Because in response to the proposed changes to Israel’s judicial system, there have been mass protests, involving hundreds of thousands of people.

And now, for the first time in the country’s history – a country that still faces genuine daily threats to its very existence – hundreds of reservists are threatening not to turn up for duty. Most of these people are associated with the top units. For the record, Israel’s standing army is not very large. It relies on those reservists.

The protesters come from most parts of society. In the past week, the Bedouin and Arab communities have also started to hit the streets. Former leaders of the police, the air force and of the judiciary – to name a few – have addressed the protesters. Whatever the age and background of these people, they serve in the army and pay their taxes.

There is no one single reason for this break in confidence in the political system. However, what we have seen in recent weeks is mind-blowing.

  • With the proposed changes, the Kenesset will have 99% authority over the courts.
  • The minister in charge of the police – with minimal previous experience, but arrested dozens of times – has tried to introduce his policies for controlling demonstrations.
  • The Minister of Finance travelled to America last week, where is poor understanding of English led to video mocking him going viral.
  • The independence of the Bank of Israel has been brought into question by a senior minister, although he retracted his comments after the markets pounced on the shekel.
  • Even the Central Bureau of Statistics is not immune. The Prime Minister wishes to approve a confidant has the new director-general.
  • The slow response of the army to preventing teenagers torch a series of houses and other property in the town on Huwara.
  • The approval of such actions by members of the government coalition, including the Minister of Finance. The latter backtracked once it became clear that American officials and banking chiefs were to boycott his overseas trip.
  • And,,,,,,,,,,,,,,,,,,,,, so the list goes on.

These are attitudes, statements and positions that would have been repulsive and unacceptable to the Israel’s founding fathers, across the spectrum. As for current society, the number of notable figures that have come out in support of these changes can be counted on one hand.

A government in a democratic society may not be liked by all. But you assume that it will ‘have the back’ of all decent citizens.

It is when you lose that mutual trust, as per Sinek’s observations, then you have a government leading its people towards a veritable abyss.

Yesterday, I listened to a feature on the Israeli news, pointing out how social legislation has no place in the current Parliamentary timetable in Israel’s Kenesset, due to the hard rush to push ahead with changes in the judiciary.

Another item that just is not on the current agenda is the budget. In fact the only budget that has been passed in last five years in Israel was that of the previous government. That is the same government led by Naphtali Bennet and Yair Lapid, who have blasted as incompetent by the only other Prime Minister in the rest of this same period, Binyamin Netanayhu.

For all the uproar of the legislation to reform or wreck (depending on your viewpoint) the powers of the judiciary in Israel, the economy has appeared to remain robust so far. Unemployment has remained low. Inflation has far less than in other leading OECD countries. For all the controversy in America, Israeli banks are highly profitable.

Netanyahu likes to present himself as a capable leader, supported by a capable team.

Yes, his Minister of Foreign Affairs did imply that the Bank of Israel should yield some of its independence. The mini-run on the shekel was halted when Netanyahu effectively censured his guy.

And Bezalel Smotrich, the Minister of Finance, has invested several days this week in America. His initial comments on raising a Palestinian village (which he has since partially or maybe fully retracted) ensured that any possible meetings with American Treasury officials were cancelled. And his meeting with influencers in the banking community have evidently been of a muted quality.

What the verbal spin of Smotrich and Netanyahu cannot hide is that there are heavy clouds forming. New home sales are down sharply, as is mortgage taking. Leading institutions are lining up to issue warnings of higher financials risks due to the changes in the financial system. And shopping malls are reporting a sharp downturn in sales on Saturday nights – a usually popular time in the winter months – as hundreds of thousands take to the streets in protests!

Some financial legislation is going through. There is to be a new law to allow senior politicians, such as Netanyahu, to receive money from people of influence. Another law will enable Arie Deri, twice convicted of financial offences, to become a minister in the government. (He has been slated to take over the finance position in a rotation agreement with Smotrich.) And of course, the budget – whenever it is passed – will secure vast extra sums for ultraorthodox communities to study all day but not work.

No help for the middle classes. No help for the self-employed sector. No known plans to investment in industries.

Yesterday, 14th March, many of the big shakers and movers of the Israeli economy met with the President Herzog. The core message: Halt this progress to hell.

Netanyahu is rightly credited with setting up many of the conditions that enabled the Israeli economy to blossom in the first two decades of the 21st century. In his own desire to stay out of the courts of justice, Netanyahu could also receive the credit for destroying that previous achievement in a two year decline.

Beware the Ides of March.

For a little over two months, the Likud-led Israeli government under Binyamin Netanyahu (Bibi) has been rapidly forcing through the Kenesset a series of bills designed to reset the powers of the judiciary.

If you are part of the government, you will claim that these are reforms, that are long overdue. Relatively little outside support has been heard for the bulk of the proposals.

The opposition can be seen in the growing weekly demonstrations (around 300,000 participants last week), warnings from international credit agencies, threats of refusing to serve from army and air force reservists, and…………….. well the list is pretty long. Even the Presidents of France and the USA have commented less favourably on the subject.

How worrying is the situation? The Bank of Israel is now demanding the banks report twice a week on shifts in currency to overseas! Anyone worried?

About 3 weeks ago, President Herzog launched a private initiative to find a compromise. By yesterday, it had become apparent that he was making some genuine progress.

Now Herzog has battled Bibi before. They come from opposite sides of the political map. Herzog was born into a family that knows all about politics and diplomacy. His brother is a serving general. And he is a lawyer by training. The day after he won the vote in the Kenesset to be President, he was seen buying veg and milk in his local grocery store. The man has pedigree.

What has convinced Bibi to change?

It is not just because Herzog knows how to ‘get around’ him. For the record, Bibi did not want him as President nor did he want him in his previous high-flying role.

Bibi’s repositioning may have something to do with the fact that support for the Likud and their allies has plummeted in recent opinion polls. It is the kind of shift – a potentially permanent change – that the country may not have seen since 1977. But more of that another time.

However, I think it has more to do with Bibi’s wife, Sara. Last Wednesday, during the most recent demonstrations in Tel Aviv, word got around that Sara was having her hair styled…..barely a kilometer away from the shouting rabble. Maybe around a thousand people rerouted in order to ‘pay her a visit’.

Sara was blocked in for about three hours, before being evacuated by the police. She claims that she felt threatened, and understandably so. Her son, in an interview the following day, said how he had briefly feared for her life. (Disclosure – neither have a good reputation in much of the local media.)

However, it must also be said that most of the protesters stood across the road. Their most dangerous actions involved shouting slogans. Nobody was arrested. In fact, during the turmoil, WOLT turned up with a delivery of fast food. Maybe young Netanyahu wondered if the food had been poisoned.

And the question remains:

On a day when it was known that Tel Aviv would be swamped by demonstrators, why did the wife of Israel’s Prime Minister deliberately exercise her right to have a haircut down the road from her foes, who are referred to as anarchists by her own supporters? Why? What was so important about the scissors and blow dryer of her stylist?

I have no idea.

I would like to think that maybe, finally at long last, the Netanyahu got to see via the reflections in the mirrors of the hairdressing salon what the average person on the street thinks of their policies.

To translate one of the slogans of last week: “As the country is burning, Sara is having a haircut.”

Last week was closed off with a horrific terrorist attack in Jerusalem – 7 people slaughtered outside a Synagogue after evening prayers by a terrorist. Less that 24 hours later, a 13 year old Palestinian kid shot at Jews in the Old City. Mayhem.

Within days, the country had moved on – apart from the grieving families and the security services.

The question of the future direction of the country proved more important than the hard emotions of the immediate past. What will happen to Israel’s democracy – assuming that Netanyahu goes ahead with his reforms of the country’s legal system?

The Israeli Prime Minister constantly repeats to his audiences that his changes will strengthen democracy. I have yet to hear him explain how. I have yet to hear experts in law – local or from abroad – backing up his ideas.

What we have seen in the past week are 50 former director generals of economic ministries, most of whom were appointed in previous Netanyahu governments, denounce the plans.

The appreciation and stability that the Israeli economy enjoys is due, among other things, to the independence of the judiciary and the civil service, and harming them and lowering their quality will lead to damage to the Israeli economy, a cut in the credit rating and difficulties in raising capital for the tech industry.

Even before these new laws are approved in the Kenesset, The Economist magazine has already notably downgraded Israel in its annual Democracy Index. And on a visit to Israel, the American Secretary of State, Blinken, hinted that Washington is not thrilled at what is coming.

Then on Thursday, the Attorney-General came out with a much anticipated statement on the Prime Minister himself and his policies. In effect, she described the plans as toxic (my wording). And as for Netanyahu, he should disbar himself from all policy making on the subject, as he is currently the subject of three pending court cases.

What was most damning about the statement from AG, Gali Baharav-Miara, was that she went through the proposed changes line by line. She dismantled their proposed benefits.

Yes: The Likud Party of Netanyahu responded with shouts of she herself was in violation of conflict of interest and a puppet of opposition politicians. However, yet again, no legal person or institution of note denounced her. None came out in favour of the government. Why is that?

Earlier this week, I was talking to a colleague, who represents clients in nearby countries around the Mediterranean. They noted that since the new government’s inauguration in Israel, there has been a significant upsurge in the inquiries from people asking about transferring wealth away from the Holy Land. Mainly just inquiries, at this stage.

Just saying.

Yesterday, I argued that the public statements of Bibi Netanyahu, Israel’s Prime Minister, do not add up. https://en.globes.co.il/en/article-netanyahu-legal-reforms-will-bring-more-growth-1001436534He claims on behalf of his judicial reforms – changes that will in all likelihood keep him out of many courtrooms – that they will enhance economic growth.

Maybe.

At a news conference last night, Netanyahu was flanked by his Minister of Finance, Bezalel Smotrich. The latter argued that “A billion lies will not become the truth. Israel’s macro data are fantastic due to consistent and good government policy.”

Good to hear, if true. What Smotrich did not realise – assumedly because of his complete inexperience – is that at least for now the current growth is due to the policies of the former government, but now in opposition!

Anyway, Netanyahu argued that the hundreds of economists who had signed a letter, asking him to reconsider his reforms were all supporters of the opposition. I suggest that is drivel – utter balderdash. Refer to the 9th Commandment, as I mentioned yesterday.

So just who has protested against these reforms to date?

  1. Over 100,000 protesters turned up in Tel Aviv last Saturday, and many thousands more around the country.
  2. Nobel Prize in Economics winner, Prof. Daniel Kahneman, was just one of those economists, who have rejected the reforms as a ‘disaster’ package.
  3. Although Netanyahu suggested that Israel’s high-tech is safe, two local VCs have already transferred their funds overseas “there is no certainty that we can conduct international economic activity from Israel”.
  4. A vast array of senior lawyers and former members of the High Court have made their position clear.
  5. The forum of university chiefs have stated in a public letter that “As those entrusted with the research and education of the future generations of the State of Israel, we warn you that the proposed reform of the legal system could deal a fatal blow to Israeli academy,”.

I guess you could argue that this is all the talk of trendy left-wing intellectuals, struggling to maintain old times. In the words of Likud politicians who criticised the Attorney-General and others, these officials have over-stepped their mark. (That is often seen in some quarters as a soft euphemism for treason.)

But then let’s add one more grouping.

Sayeret MatKal is The Elite of elite groups in the Israeli army. Netanyahu himself served in the unit with distinction. His brother, Yoni, also served, tragically not returning alive from the infamous Entebbe raid in 1976.

Former members of this unit are planning a march from their army base to the Prime Minister’s office in Jerusalem.

Just another band of ungrateful has-beens, who don’t know their place in society?

The shekel has not collapsed. The Israeli stock market has not plunged. For now, Israel’s financial institutions do not represent the picture of London Summer 2022. However, the Bank of Israel has issued a stark warning, which has been publicly thrown in the bin.

What next, Mr. Netanyahu?

In the name of greater democracy, Netanyahu and his coalition allies continue to promote a reform of Israel’s judicial system.

Over the past two weeks, more and more groups within local society have voiced their opposition to the plans.

Whether it be the Chief Justice herself, Esther Hayut, or representatives of the legal profession or other former senior judges, none have found a good word for the proposals. It is also significant to note that the government has not brought any justification for its policies from any other legal sources at all, let alone anyone of consequence. All the Minister of Justice, Yariv Levin, has been able to do is bully his critics, verbally.

Then there is the position of the Attorney General, who has been a target of Netanyahu and his allies ever since she took office around a year ago. Gali Baharav-Miara was cited on the TV news channels for considering if Netanyahu is allowed to take part in the reform proposals, as he himself is currently facing three separate charges in the courts.

More bullying and threats immediately followed from the Likud troopers. The lady was forced to issue a hasty denial that any such talks had ever taken place. Why should she be treated this way?

Then came the turn of the Governor of the Bank of Israel. He has just returned from Davos, where apparently many a worried investor warned him that such reforms would severely weaken Israel’s position in the international financial community. Silly silly Professor Yaron. As already reported in the Hebrew press, according to Likud politicians, the man has overstepped his position (for acting responsibly?).

And I could go on.

The message: Attack Bibi or attack the policies of the Likud and you will be personally abused. You follow the party line or get dumped on.

As a sideline, it is interesting to note that the number of violent acts recorded against members of the medical profession, teachers and on the road have risen significantly over the past year or so. Just saying!

Enter the high-tech community. About 15% of the workforce. About 40% of the exports of the country. And bitterly concerned that the overseas community, responsible for financing the ‘Start-Up Nation’ concept for decades, will be frightened away by the reforms and other socially conservative proposals.

One of the core principles of the Israeli high-tech community is diversity – people of different religions, sexes, abilities and political persuasions share opinions to create amazing technologies. Criticism is welcomed, not swotted away. This approach to life – this success – is now under direct threat.

Yes; the owners of many of Israel’s leading tech companies allowed their workers time off to protest on Tuesday.

For the record, Nir Barkat, is currently the Minister of Economics. He is independently wealthy due to an exit some years back. Popular within the party, his voice has been heard through its silence in recent weeks.

But democracy is democracy. And therefore, Netanyahu and his supporters are right, no?

There are 120 members of The Kenesset, the Israeli Parliament. 64 are part of the government.

Of the 64, 32 are aligned to the Likud, ostensibly a liberal-looking right wing grouping. Many of its members are religiously observant, although that is difficult to claim of the Netanyahu family. The remaining 32 come from various religious groupings, which deep-down proclaim that the country should be governed according to the laws of the Bible.

In other words, at least half of Bibi’s government does not care over much about democracy!

So when Bibi says it is all in the name of democracy, does that contradict the 9th Commandment in the Bible, the one about lying?

Local taxes have been frozen, and recent price hikes in electricity, water and gasoline have been reduced.

Globes Financial Newspaper, 11. January 2023

Sounds fantastic for the average Israeli – more money in the pocket. But……..

Well, there were no details on who would finance this or how? Just like there have been no details on would finance all the commitments that Bibi has made to his coalition partners, which will keep him in power and assumedly away from the courts of justice.

Now we know that Israel is running an economic budgetary surplus, just, for now. And exports hit a new peak in 2022, despite the threat of a global recession. However, what the financial markets require is both fiscal and monetary stability. The government is not providing all the necessary safeguards for now.

It is only a few months ago that the Liz Truss government in the UK tried a similar policy – reversing the rule book and throwing to the wind financial responsibility. She lasted just over 7 weeks as the PM.

Bibi is more savvy than that. However, the international agencies have already issued a warning. Israel may no longer be able to maintain its high level of worthiness amongst the credit ratings. That will make it more expensive for Jerusalem to raise money in order to cover its debts.

Earlier this week, SKY TV published its independent findings on who funds the MPS beyond their statutory salaries. The lack of transparency was staggering.

If Bibi already seems to be looking at the UK for economic guidance, maybe he should consider releasing details of those who are funding him and his political allies?

Great fuss was made in Israel last week, when “The Economist” magazine cited the country as having one of the fastest growing economies throughout 2022.

Michael Humphries cited 6 reasons for this boom. New export markets, continuing immigration and even an uplift from continuing security issues were all part of the chain of events contributing to this Covid-Ukraine era of uplift.

Maybe I could have added the continuing internal political turmoil, which ensures that it is difficult for any government to overspend.

And then enters the new finance minister, Mr. Bezalel Smotrich. He is purportedly about to propose legislation that will remove numerous bureaucratic procedures holding up the progress of crucial infrastructure projects. Good news, hopefully?

Earlier this week, I commented on his other plans to “roll back tax hikes on single-use plasticware and sweetened drinks put in place by his predecessor”. The move is obviously designed to please his supporters, a populace who tends to buy such rubbish food, and in quantity.

The following day, I was listening to a couple of podcasts with a British professor of medicine, Tim Spector. Now an author of five books and hundreds of medical articles, his latest work is a best seller: Food for Life : The New Science of Eating Well

Spector basically debunks the whole soft drinks industry. Regular Sprite or ‘low calorie’ cola are all full of potential poisons. One of his favourite researchers on the subject ironically heralds from Israel: Prof Eran Elinav, an immunologist at the Weizmann Institute of Science, south of Tel Aviv.

Will Smotrich learn to read the details of his briefs before other policies threaten the lives of Israelis?

Meanwhile, he will no doubt press ahead with his battle against bureaucracy. Hopefully, this will enable vital projects to move ahead, such as the light railway in Tel Aviv, urgently required to alleviate the daily traffic jams. There again, his colleague in government, Miri Regev who is the Minister of Transport, continues to oppose the Metro plans in Tel Aviv.

Thus, the final result of Smotrich’s efforts to combat inefficiency may just end up as paper in the rubbish bin………………where it can join all those additional empty plastic bottles.

It is generally agreed that both as Finance Minister and later as Prime Minister, Bibi Netanyahu has had a big hand in the significantly improving status of Israel’s economy.

Now entering his 6th term as PM, one of the country’s leading financial services, “Globes” asks outright if ‘Netanyahu has given up on Israel’s economy’.

Awkward.

After all, he has appointed two people to the position of Finance Minister, serving alternatively in a two-year rotation cycle. The second is his long-time political ally, Arye Deri, who has twice been convicted for financial issues. The first incumbent is Bezalel Smotrich, not previously known for any deep acumen in the world of economics nor trade.

It took Smotrich barely 48 hours to come out with his first policy statement. He has “instructed ministry officials Sunday to roll back tax hikes on single-use plasticware and sweetened drinks put in place by his predecessor..”

Issue number one: The incoming government has promised humongous sums to all the coalition partners – unbudgeted because there is no budget – and the first thing the minister does is cut (marginally) his revenue pool. Hmmm. Maybe we can just forgive that.

Issue number two: Israel has one of the highest rate of diabetes in the West, and this move only encourages further drinking of items openly labelled with high suage content. It took the doctors’ association just a few hours to register its disgust. There again, what do they know about people’s health compared to Mr. Smotrich.

Issue number three: Israel has already been cited as failing to push hard enough the agenda of a better global environment. And now we are going to be encouraging the use of even more plastic bottles. Three strikes and you are out.

So, the Treasury will lose a billion or so shekels annually and the country will be more polluted just so that the constituency of Smotrich – primarily large families with young kids can be fed drinks that are simply junk – which I guess is the word that sums up this whole approach.

I just hope Smotrich takes longer to mull over his next statement and its ramifications.

It is almost two decades since Bibi Netanyahu was appointed as Israel’s Minister of Finance. Friend and foe acknowledge that he set the tone for a period of unparalleled growth in the economy. In 2022, “The Economist” of London credits Israel with ranking fourth amongst the best performing economies.

So what next? What will happen in 2023, as Netanyahu seems very likely to form his 6th government in the next few days?

Officially, the economy is still expected to grow, but at a much lower rate. The likely outcome is under 3%. Given post covid fall out, Ukraine and other international global shocks in the financial markets, this can be considered reasonably positive. However, Netanyahu bears little direct responsibility for the achievement.

What is at his disposal is a very hefty budget surplus. Large parts of these monies had been designated to help the self-employed recover from the covid period. For political reasons, Netanyahu’s party along with its allies blocked the legislation.

Meanwhile, as the Prime Minister Designate crawls towards announcing his cabinet teams, every day seems to come with a new announcement. A new sub-ministry or large department will be created to meet yet another demand from yet another so-called coalition partner.

I have lost track of all the changes. For example, there will be a whole new section if the Ministry of Defense. The religious academies (Yeshivot) will have their budget doubled. Several new justices will be appointed to the Supreme Court.

And so the list goes on.

From what I can tell, none of these handouts will result in an increase in productivity. Nor are they likely to generate any wealth for the country.

I recall a news item from about five years back, A respected economics team had calculated that the financing for each new department with a ministerial staff was around 10 million shekels per month – say about US$2.8 million a months.

If there are 5 such new offices, that is about an extra US$176 million in taxpayers money annually. And that is before any handouts for housing in the ultra-orthodox communities or building religious institutions or…………….

I cannot believe that the international financial markets will remain placid for too long. Israel still needs to raise money to sustain its economic growth. Israel’s credit rating remains high…..for now!

And as for the self-employed? You remember – those people who work for a living and generate wealth.

They were unofficially represented in the previous Parliament by Amichai Shikli. He changed allegiances earlier in 2022, moving over towards Netanyahu’s Likud party. This was one of the primary reasons for the fall of the previous government and the onset of a general election campaign, which Netanyahu won.

As Netanyahu has been handing off his coalition partners, doling out large sums to shut them up, Shikli appears to have lost his voice. There again, his salary is now guaranteed for the next few years!

Can Israel afford these additional and rising non-functioning payments over four years?

Perhaps the more pertinent question is why Netanyahu – who clearly knows better from the point of view of running an effective economy – finds himself forced to be totally imprudent with his fiscal policies?

Yesterday’s financial news in Israel saw journalists leaping with pain. They had a ton of bad news to throw at their public.

It’s not just that the teachers’ strike is a very large possibility on 1st September (yet again and two months before a general election). It is now very evident that inflation is on the move northwards. It has climbed to over 5%. And to combat this, the Bank of Israel (BoI) raised its base rate to 2% by a massive 0.75 points in one move, a disappointing change not seen for 20 years.

The governor of the BoI appeared on TV last night. With the summer heat raging outside, in his tie and jacket, he calmly explained that things are not as bad as they seemed. Well, he would, wouldn’t he? That’s his job.

But is he correct?

Sure, compared to the UK, where the rate of inflation is double that in the Holy Land, where the food supply chain in trouble due to an oppressive drought and when many are facing the horror of unpaid energy bills, Israelis should stop complaining. (Actually, many believe that to be a biological impossibility!)

Israel has four factors going for it that together are helping to keep their financial miseries under control – at least for now and for most people.

First, the Israeli economy is still growing at an exceptionally healthy rate. The country has seen a 7.4% boost over the past 12 months, much of this led by the return of the tourism sector. Unemployment is still very much a non issue.

Second, an unofficial consumers’ revolt, encouraged by some aggressive TV reporting, has forced many of the local food manufacturers as well as importers to restrain planned price hikes. They have either been reduced or delayed for several months. In fact by then, lower petrol prices may kick in to put off once more some of those planned increases.

Third, if we are talking about the cost of delivery, the government has substantially reduced the tax on petrol by at least 0.5 shekels. To put that in perspective, The price at the pump is now about 6.5 shekels per litre.

And finally, the shekel has remained incredibly resilient against most other currencies. Compared to the dollar, it has recovered its position of the early summer. Against sterling, it is appreciated by about 12% over the past year. This strength is helping to keep down the cost of imported inflation.

As ever in economics, we know what has happened, but it is difficult predict the future. The country has obtained lucrative gas contracts with Europe, as a result of the sanctions imposed on Russia. The battles with Gaza and Lebanon seem to be on hold for now. And with an election scheduled for 1st November, the government has a vested interest to ensure that the voting public remain in their comfort zone of complaining, but not too much.

I could argue that relatively speaking that is not a bad position for an economy to be in these days.

Sometime towards the end of October 2022, Israelis will go to the polls for the 5th time in 3 and a bit years.

It is a pretty stupid way to prove that you are the only democracy in the Middle East.

In the 4 previous elections, Netanyahu was unable to form a stable government. He ended up making enough enemies of previous friends on the right of his party. While never a homogenous group, the various factions in addition to some left wing parties managed to hand out enough sticky plaster and stay together for a fraction over a year.

Last week, that coalition collapsed. Unless, there is no last minute surprise – and this is the land of miracles – the voters will have their say again. The pundits are – would you believe it – currently predicting the same result!

For those new to Israeli politics, let me explain two core fundamentals to understanding this game.

  1. Since the founding of the state in 1948, all governments have been coalitions. How complex is that? This outgoing team has about 36 ministers, while the Kenesset has 120 members.
  2. Most elections in democracies are determined by how people feel. That is often a reflection of the perceived position of the how much money you have in your pocket. The economy is rarely an important electoral issue in Israel.

You would have thought that political instability is bad for the economy. Not in Israel, at least not for now. The outstanding success of the tech sector, combined with the riches from gas revenues and the taxes from the property sector have all combined to keep the finances stable. Despite corona, Israel’s debt ratio continues to fall rapidly.

It is true that the Israeli economy contracted further than had been initially forecast in early 2022, at close to 2% annually. However, inflation remains relatively modest despite higher energy prices. Unemployment remains at under 4%. And, what counts is how Israelis will be feeling towards the Autumn as opposed to today. That is a relatively long time off.

The politicians know this. For example, the opposition parties, led by Netanyahu’s Likud party, have spent the past 4 months blocking a move to give financial compensation the self-employed. This is one key sector of the economy still suffering from the impact of corona. The logic is that the delays will help to disrupt the functioning of the government and thus help in its downfall.

They were right. And the self employed and their families continue to suffer.

What happens next?

First the Kenesset needs to confirm finally that it is dissolving itself. As you can tell from the above, few gambits are certain just now.

The OECD expects Israel to pull in growth rates of 4.8% and 3.4% for 2022 and 2023. That is about 10% above the average for the rest of the group, and thus surely a sign of competence. Even better, this forecast is in line with Fitch’s belief that the underlying factors of the local economy are stable, despite Ukraine et al.

So where’s the proverbial “but”?

Since its foundation in 1948, only briefly has Israel been governed by a party with a majority in the Kenesset (Parliament). And just when you think that the coalition political back-stabbing could not reach an even lower point, along comes a new crisis.

Certainly, June 2022 resembles such a watershed. The current government has lost its majority in the Kenesset. Yet the opposition, led by Netanyahu, cannot replace it. New elections are not a certainty. Where to next? I don’t know.

But what is certain is that financial markets do not like uncertainty! And Israel is heading right slap into a mess.

Analysts have already started to predict a slowdown – higher interest rates, established overseas markets closing their doors, higher energy prices, and more. Just as worrying is that in the past, the slack has been taken up by the hightech sector. However, for the first time in over two decades, the Israeli tech sectors are showing signs of tiredness.

Add in a lack of political direction from the centre, and the concern levels are beginning to mount. Israel, an economic powerhouse, is in danger of losing is status of ‘being all right despite everything’.

No – it is not all doom and gloom.

  • Israel is signing significant new trade agreements, particularly with Arab States.
  • Unemployment remains low at 3.4%, and the state budget has not been so balanced since the global credit crunch of 2008.
  • Wierdest of all: The EU is looking to Israel for helping in resolving its gas shortage due to the Ukraine war. Compare that line to the news of the 1970s and the oil embargos! The upshot will be a very healthy bonus for the Ministry of Finance in Jerusalem.

The political instability will not be resolved immediately. If there are to be elections, they may not be held for months. If a new coalition is formed, it is very likely to face similar challenges to the current incumbents.

And that leads Israelis fighting for themselves, rather than be guided by politicians, who are currently acting like selfish children.

If you judge by the headlines alone, Israel’s economy seems under pressure for the first time in almost two decades.

  • Inflation on the move – a monthly climb of 0.8% in April
  • Strikes looming in key parts of the public sector.
  • House prices rising by 16% annually, as of the end of April.
  • The GDP shrunk in the first quarter of 2022.
  • Super-Unicorn “Wix” continues to post loses.

All gloom?

Not really. Yes – politically, any opposition party would seize on this pile of ammunition and pound their foes. However, as with the government, Israel’s opposition is as united as the United Nations itself (sic).

The truth is that for now, the fundamentals are strong. For example:

  1. Due to some unusual one-off statistical reporting, the GDP was not expected to reveal strong findings this time round.
  2. Israel is discovering additional large gas supplies, just at a time when Europe needs to replace its Russian resources.
  3. Israeli high-tech continues to find new markets, now accounting for over 54% of all of its exports.
  4. Dare I say it, but Israel’s defense manufacturers are also no doubt quietly benefitting from the fall out from Russia’s expansionist dreams.

If you want some anecdotal evidence, just consider my own work. I have seen a handful of clients this month alone who have approached me as a business mentor, looking to open up in the Jerusalem area.

When the “dot.com” bubble burst at the turn of the century, the Israeli economy took a hit. Since then, neither the credit crunch of 2008 nor wars with Hamas and the Hizbollah nor the pandemic have succeeded in halting the juggernaut of the start-up nations’ economy.

For now at least, Israel’s gloomy economic news may require some careful analysis but it has yet to demand a full rethink of policy.

An item on an edition of the Financial Times podcast this week indicated that currencies of smaller economies are weakening daily, particularly against the dollar.

There are many reasons for this. They include the relatively sharp rise in interest rates in the USA, who will be hit hardest by the fallout from the Ukrainian mess, and the continuing impact of 2 years of covid. Each country will have its own idiosyncrasies. Meanwhile, let’s have a look at the position of the Israeli shekel.

Overall, despite new domestic political shenanigan’s and the threat of Palestinian violence, the Israeli economy is doing well. The Treasury is having a windfall with a whopping budget surplus, unemployment will struggle to go any lower and the world of high-tech bubbles along. And just at the right time for Europe, new gas reserves have been discovered in Israeli territorial waters.

Earlier this week, the financial newspaper “Globes” reported that the Israeli shekel is valued at its lowest for 20 months against the dollar. Again, there are many causes for this – international stock market uncertainties, et al. But let’s not forget that following on from the turmoil at the end of the Trump administration, the shekel was only recently considered the darling of world currencies.

Where next?

In the past, the Bank of Israel has always ensured that its rate of interest remained competitive when looking over its shoulder to what the Fed does. That difference looks as if it might be partially eroded in the near future. That implies that the shekel has further to decline.

A client of mine has to create a new pricing strategy for exports around the globe, looking at setting prices for up to a year ahead. As his business mentor, what did I think?

Given the various geopolitical uncertainties that look as if they will linger and impact for months to come (at least) and given the political uncertainty in Israel, I said that he had two options. Either add in a large safety factor and totally overcharge from the getgo. Alternatively, he should refuse to commit to prices beyond the next three months.

Those running the economy in Jerusalem may have some reserves compared to their counterparts in the OECD, but that extra rope is still limited. Tricky times ahead.

Tonight, a cold wet Saturday night, thousands of Israelis have taken to the streets in support of Ukraine. Earlier today, the Ukrainian President, Zelensky, suggested that Israel could act as a mediator with Russia, because Jerusalem is one of the few democratic capitals with good relations with both sides.

As the Ukraine – Russia conflict has brewed, simmered and then boiled over, Israel has found itself in the most delicate of delicate positions. Here are the six reasons why. (By the way, the order of importance is for you to decide afterwards.)

First: Let’s face it. There are still 200,000 Jews living in the Ukraine with its rich legacy of traditions. This includes Zionist history in Odessa and the important burial grounds in Uman.

Second: It is an open secret that Israel’s air force has spent much of the past few years bombing Iranian positions in Syria. As many of these are located near Russian bases, this effort has been maintained (and continues for now) with the tacit agreement of Moscow.

Third: Ukraine is the largest supplier of wheat to the whole of the Middle East, including Israel. This is the core ingredient in staple foods. Prices of the commodity have already leapt upwards on the world markets.

Fourth: Over the past few months, after 15 years of increasing enmity, Turkey has been strengthening its ties with Jerusalem. Wondered why? The are probably many reasons, but just remember why the ports in Crimea and on the southern coast of the Ukraine have historically been so important for Russian monarchs and rulers. Look where the Black Sea emerges in the south. Ooops!

Fifth: Putin has made much of labelling the Ukrainian government as Nazi. Interesting rhetoric. The mother tongue of President Zelensky is Russian. As for his religion, he was born Jewish!

And finally, it is estimated that 25,000 Ukrainians are employed as subcontractors in Israel’s hightech sector. As the CEO of Lemon.io posted on LinkedIn earlier:

We have 40 employees and 100s of Ukrainian developers in our network.

1/Cash.
• we’re paying 2 months worth of salary in advance to our employees
• developers will get payouts 2х more often
• we’ll try to generate enough cash in case banks fail to provide services

2/ Support.
• if anyone has to or volunteers to protect us against the enemy, we will keep their jobs and pay them full salary while they are at war
• those who stay in regions under attack will keep their jobs and get fully paid
• we will relocate those who feel unsafe

3/ Shelter.
In case of a full-scale war and absence of internet/phone connection, we set up an address in a western city, Lviv, where they can get assistance with accommodations.

So far, a vast range of international sporting events featuring Russia have been cancelled. From my perspective, it is not difficult to understand why.

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