Opinion |

Apres Netanyahu, Le Deluge? Wait for the Markets to Crash

Give Bibi credit for the political and policy stability Israel has enjoyed in the last eight years. But as the investigations close around him, we should get ready for a rough ride

David Rosenberg
David Rosenberg
Netanyahu at the Tel Aviv stock market.
Netanyahu at the Tel Aviv stock market.Credit: Ariel Schalit
David Rosenberg
David Rosenberg

Whatever else you might think of Benjamin Netanyahu, you have to give him credit for always being there, at least since 2009, and that’s nothing to sneeze at.

We have had two elections in the meantime, changes in the coalition partners, and ministers come and go, but Netanyahu has reported for work day in and day out, pulling the strings and orchestrating a pretty consistent diplomatic, security and economic policy all along.

Don’t think this hasn’t had a positive effect on the Israeli economy. It has performed well over the Netanyahu years by virtually every measure. The Tel Aviv Stock Exchange has been a laggard, but the shekel has strengthened against the dollar, foreign investment has been streaming into the country and Israel’s credit rating has risen.

If nothing else, Netanyahu and his finance ministers have conducted a responsible fiscal policy that has served as the bedrock of the economy.

Now it looks like Bibi era is coming to a close, and as personally loathsome as he may be in many eyes, we may all rue the day he takes that final helicopter ride back to his Caesarea villa, never to return to Balfour Street.

The Chris Christie precedent

Until now, the investigations targeting him and his closest associates (Cases 1000, 2000 and so on) have been a sideshow – interesting and amusing, if you like salacious stories about Cuban cigars, champagne, purloined garden furniture and backroom deals with titans – but they have never the main event. Over the last week or so, however, they have been quickly moving to the center ring.

Netanyahu himself hasn’t been directly implicated in the submarines scandal, but if the story of his attorney and others making huge profits at the cost of Israel’s security and over the objections of the defense establishment proves true, it will be hard for the prime minister to stay aloof. Even dedicated Likudniks who have casually dismissed his hobnobbing with tycoons and penny ante alleged corruption could find this to be too much.

The case of the Bezeq phone company and inside information fed to Netanyahu's friend Shaul Elovitch is also getting dangerously close to the prime minister.

Again, Netanyahu hasn’t been directly accused of anything, but what reasonable person is going to doubt that Shlomo Filber, the political ally Netanyahu installed as Communications Ministry director general, wasn’t doing his boss’ bidding. It’s like New Jersey Governor Chris Christie claiming that his aides closed down the George Washington Bridge without telling of their plans or telling about it afterwards.

Christie managed to avoid indictment, but no one believed him (what does anyone think his aides did it for – their personal pleasure?) and his political career is over.

Like Christie, Bibi may not go down in a criminal indictment, but he may go down in disgust. Either way, the odds are looking good that is how his political career will end.

Suddenly, the shekel

The foreign currency market may have given us a taste of things to come in the post-Bibi era. In the space of two days, the shekel lost 1.4% against the dollar before steadying on Wednesday morning.

It would be stretching things to say that the shekel's slide was over the arrests in the submarine affair; the fact is there was a surge in dollar buying this week by two companies for business purposes, and the June inflation index took the markets by surprise by falling sharply, putting off the day of an interest rate hike in Israel.

Those are two good perfectly reasons in of themselves for the shekel’s losses. But nervousness over the future of the government probably played a role, too.

While the shekel’s losses this week attracted the most attention, the fact is the currency has lost 2.8% over the last two-and-a-half weeks before the CPI came out and before the big currency trades. Something bigger is happening.

The problem is not losing Bibi per se, but what is likely to come in his wake.

The price of a weakened Bibi

In the short term, a weakened Bibi will be forced to concede to the most extremist and irresponsible members of his government – the settler bloc led by Naftali Bennett and the culture warriors led by Miri Regev and Ayelet Shaked. This can only land Israel into political hot water with Washington, exacerbate domestic political tensions and maybe needlessly push Israel into a war, all of which will give investors and consumers good pause for thought.

In the longer run, the situation looks even more dire.

Bibi’s genius has been to put to successfully pasture anyone in the Likud who has any pretensions or potential to replace him as leader. Outside the Likud, there is no party with enough Knesset seats to lead a coalition, or a leader with the skills to fix that.

Labor’s Avi Gabbay would have to lead nothing less than a political revolution that convinces Israel’s center-right majority to move to the center left. I don’t see what is going to spur that change, nor is there much time to accomplish it. Yair Lapid, Candidate No. 2 for the job, is a political lightweight who is even less likely to pull off a feat like that.

That leaves Israel in the hands of a leaderless Likud that will cater inevitably to the extremists.

To mash up that famous warning from Madame de Pompadour, the lover of King Louis XV of France, “Apres Netanyahu, le deluge.”

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