Bank of Israel Governor Amir Yaron said the government’s proposed legal overhaul could harm judicial independence and lead to a dangerous brain drain, adding a voice to an unprecedented campaign of protests and petitions by the country’s business leaders to stop the effort.
(Bloomberg) — Bank of Israel Governor Amir Yaron said the government’s proposed legal overhaul could harm judicial independence and lead to a dangerous brain drain, adding a voice to an unprecedented campaign of protests and petitions by the country’s business leaders to stop the effort.
“The changes in the judicial reform could weaken some of this independence” of the legal system, Yaron said in an interview with CNN. “Moreover, the process itself is a hasty one and does not have a wide agreement in the public.”
The remarks mark the governor’s strongest public criticism to date and place him among the most senior Israeli officials to speak up against the planned overhaul. Yaron’s five-year term expires in December, and it’s yet unclear if he’ll stay on in the job.
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The government’s proposals, unveiled in January, include transferring the final say on the appointment of new judges from sitting justices to lawmakers as well as allowing parliament to overrule high court decisions.
Proponents say the changes are needed to restore the balance of power between the branches of government, arguing that the supreme court has become overly activist. They also say that the makeup of the court doesn’t reflect Israeli society.
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Yaron, formerly a finance professor at Wharton business school, has previously couched criticism of the plans in a broader declaration that “strong and independent institutions” were essential for a prosperous and developed economy.
Others at his institution openly took sides in the dispute, with one member of the central bank’s policy-setting body quitting in January and going public with his opposition.
Yaron, who serves as an economic adviser to the government, told CNN that some leaders in the technology sector have predicted that new investment might not come in as a result of the changes, while others have said they might ultimately take their business abroad.
“In the long run, the implication might be basically brain drain, et cetera, and this is why this needs to be handled with care,” Yaron said. “This has huge implications and this is why, again, it is imperative that we maintain the strength and independence of this institution.”
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Tens of thousands of Israelis have demonstrated for weeks against the legislative push, warning it could undermine Israel’s democracy and threaten civil rights.
Asked whether he had any concerns about the central bank’s independence, Yaron said he believes that Israeli leaders understand the critical importance of maintaining its standing.
Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich recently made clear their support for the Bank of Israel’s autonomy in monetary policy, rebuking Foreign Minister Eli Cohen for slamming a run of interest-rate increases.
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Yaron reiterated his determination to bring inflation back down to the government’s 1%-3% target, and added the central bank will, if warranted, continue to raise rates to achieve that goal.
Many policymakers around the world are facing inflation “stickiness,” he said, and that means that it will take “a little bit more pain” in order to bring price growth back to its target.
If the central bank stops raising rates too early, inflation can come back “with a vengeance,” Yaron said.
“Therefore, I predict that, at least around the world, we will see rates continue to go up and they will continue to stay up for quite a bit longer,” he said.
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