Prof. Karnit Flug was appointed as the first female governor of the Bank of Israel by Prime Minister Benjamin Netanyahu in 2013. Together they worked to stabilize and grow the country’s economy – particularly its flourishing high-tech sector. 

Now, she tells Haaretz Weekly, she no longer recognizes Netanyahu. He's not the same leader. The prime minister has ignored the alarm bells that she and other experts have been ringing regarding the harm his controversial judicial overhaul will cause Israel's economy. 

“The warnings by experts on the economic effects and the effects on our national security are not falling on ears that are listening,” she tells host Allison Kaplan Sommer. “It’s very hard to understand.” 

Countries that have passed laws weakening their judicial branches, like Hungary and Poland,  have paid economic consequences. However, Flug stresses that the price is likely to be far higher in Israel. Not only will an expected decline in international credit ratings lead to “really detrimental long-term effects,” but the harm to the country’s high-tech sector would be particularly devastating. Unlike Poland and Hungary, she notes, Israel’s tech companies account for 10 percent of employment, 50 percent of exports and 25 percent of tax revenues. 

Moreover, high-tech is “a very mobile sector” where companies can - and do - easily move to other countries.  “Our vulnerability is very, very strong,” says Flug, admitting that she is feeling “anxiety about what kind of country will be here for my children and for my grandchild.”

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