Several high-tech companies are resenting the judicial reform plans of Israel’s new ultra-conservative government and are withdrawing their funds from the country.
Much has been said about the security situation in the Middle East, with a new cycle of deadly violence opposing Israelis and Palestinians: more than 75 dead since the beginning of the year. We also mentioned the highly contested reform of justice, carried out by the government of Benjamin Netanyahu, combining the right and the far right. But the Israeli economy is also in turmoil.
What went up in recent years before coming down in recent months and playing yo-yo in recent weeks? It’s the shekel, the Israeli currency. Five years ago, it took 4.33 shekels to get one euro. At the end of last summer, it only needed 3.26. The shekel has become a strong currency thanks to very strong economic growth in Israel and massive investments in dollars in the local economy: 21 billion last year. High-tech represents 10 to 15% of national wealth and more than half of Israeli exports, but today the Israeli economy is in doubt. The shekel fell 6% last month, to its lowest level in three years: today one euro is worth about 3.80 shekels, because the plans of the new Netanyahu government are causing great concern in economic circles.
Tel Aviv stock market drops 4%
However, the justice reform projects do not concern the Israeli economy. But what is called the “start-up nation” is not only ultra-innovative companies, it is also a spirit of inventiveness, non-conformist, liberal and a little libertarian which does not adapt well to the new ultra-conservative government. The leader of an ultra-religious party allied with Netanyahu said studying Torah was more important than English and math. Imagine high-tech without English and math!
At the end of January, high-tech employees organized an unprecedented demonstration in Tel Aviv. Israeli company Papaya Global, which offers companies a payroll payment platform, has announced that it is withdrawing its funds from Israel. It is valued on the stock market at more than 3.5 billion euros and has Microsoft or Toyota among its customers: its CEO denounces a reform project “undemocratic”. Investors have doubts: last week, the Tel Aviv stock market lost 4%.
Fitch, JP Morgan Chase, or Goldman Sachs have published warning notes to the point that Prime Minister Netanyahu – more than 15 years in power and who calls himself “Mr. Economy” – has sent his Minister of Strategic Affairs to reassure the rating agencies. In a week, his colleague from Finance is expected in the United States to reassure the business community there.