Israeli Government Prioritizes Political Deals Over Key Economic Legislation Ahead of October Elections

In the final week before the Knesset's dissolution, crucial economic legislation has been sidelined despite broad agreements between coalition and opposition members. Several significant bills, including the Credit Data Law aimed at reducing financing costs for small and medium businesses by at least 1.5 billion shekels annually, have been delayed or removed from the agenda. This law, considered by the Bank of Israel as the most important financial legislation pending, was expected to pass before the elections but remains unvoted.

Other major economic reforms, such as the establishment of metropolitan authorities to overhaul transportation and infrastructure, and the expansion of hedge fund regulation, have also stalled despite committee approvals. Meanwhile, the government is advancing politically motivated bills with potential long-term economic impacts, including the Basic Law on Torah Study, which enshrines Torah study as a fundamental state value and may exempt ultra-Orthodox men from military service. The Finance Ministry warns this could exacerbate low Haredi workforce participation and necessitate a 16% tax increase by 2065 to maintain current public services.

A political deal reportedly struck by Prime Minister Benjamin Netanyahu with ultra-Orthodox parties includes advancing a temporary freeze on arresting draft dodgers until November 30. Despite legal opposition, the coalition aims to pass this quickly. Concurrently, the Knesset is pushing to extend mandatory military service to 32 months to reduce costly reserve enlistments.

The government is also pursuing structural changes to the Attorney General's office, weakening its authority and making legal opinions advisory rather than binding. This includes provisions making it harder to investigate or indict public officials, including the prime minister. Additionally, a parliamentary inquiry committee into the October 7 attacks was approved in first reading but is unlikely to pass before the current Knesset dissolves.

In the communications sector, a deal between Shas and Communications Minister Shlomo Karhi will reverse previous kosher certification reforms, returning control to the Chief Rabbinate at an estimated annual cost of 750 million shekels. The Communications Law, facilitating new news channels and a government news app, faces opposition from ultra-Orthodox factions concerned about Sabbath broadcasts and content. Meanwhile, a new radio licensing framework extending current licenses to 2033 was approved despite concerns it will harm competition.

Overall, the legislative agenda reflects a shift from economic priorities to political bargaining, with the October 27 elections looming and key economic reforms left in limbo.