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Israel rejects Moody’s warning of ‘significant risk’ amid political tensions

July 27, 2023 at 12:44 pm

Israelis holding flags gather at Hashalom metro station to protest the judicial overhaul bill to limit the court’s powers as security forces take measures in Tel Aviv, Israel on July 18, 2023 [Mostafa Alkharouf/Anadolu Agency]

Israel has dismissed the latest report by credit rating agency Moody’s, which has warned about “negative consequences” and “significant risk” for the occupation state’s economy following the passage of the first bill of the government’s controversial judicial reforms, which have sparked massive protests and strikes across the country.

“We believe the wide-ranging nature of the government’s proposals could materially weaken the judiciary’s independence and disrupt effective checks and balances between the various branches of government, which are important aspects of strong institutions,” the report published on Tuesday said.

Moody’s also cautioned that the current political situation is “raising the risk of a constitutional crisis between the executive and judiciary” with petitions opposing the bill having been lodged with the Supreme Court.

In April, the agency downgraded Israel’s credit worthiness from “positive” to “stable”, but did not change Israel’s credit rating in its latest report.

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US investment bank Morgan Stanley has also updated Israel’s sovereign credit to a “dislike stance”, stating: “We see increased uncertainty about the economic outlook in the coming months and risks becoming skewed to our adverse scenario.”

In response, the Israeli government has rejected the reports. Prime Minister Benjamin Netanyahu, in a joint statement with far-right Finance Minister Bezalel Smotrich, said, “This is a momentary reaction,” adding that “Israel’s economy is based on solid foundations and will continue to grow under experienced leadership that leads a responsible economic policy.”

However, the head of the Tel Aviv Stock Exchange (TASE), Itay Ben-Zeev, yesterday called on the government to take the warning seriously, calling Moody’s report a “wake-up call.”

“Moody’s is an objective and neutral international body that bluntly says that although our economy is strong, we as a country are on a slippery slope that will eventually cause significant economic damage to all citizens of the State of Israel,” Ben-Zeev stated. “This is a reflection of Israel’s economy in the eyes of the world, and we must not ignore it.”

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