© Reuters. An aerial view shows people during a demonstration against Israeli Prime Minister Benjamin Netanyahu and his nationalist coalition government’s judicial reform, in Tel Aviv, Israel, April 15, 2023. REUTERS/Ilan Rosenberg
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JERUSALEM (Reuters) – Israel’s government rejected a downgrade of the country’s outlook by credit ratings agency Moody’s (NYSE:) on Saturday as tens of thousands of Israelis took to the streets to protest a planned reform of the country’s judicial system.
Moody’s report issued on Friday marks the latest warning about a possible economic reaction to Prime Minister Benjamin Netanyahu’s legislative push.
The measure includes giving politicians greater influence in the selection of judges and limiting the power of the Supreme Court to strike down legislation.
Moody’s affirmed Israel’s sovereign credit rating at “A1” while revising its outlook to stable from positive.
“Israel’s economy is stable and strong and with God’s help it will remain so,” Netanyahu and his Finance Minister Bezalel Smotrich said in a joint statement.
They said the concerns raised by Moody’s are “natural for those unfamiliar with the strength of Israeli society.”
At the same time, tens of thousands of Israelis again gathered in Tel Aviv and other cities to intensify weekly protests, waving flags, banging drums and honking horns.
They worry that the proposed changes will weaken the courts and jeopardize civil liberties.
Moody’s, summarizing the months of turmoil since Netanyahu returned to power late last year at the head of a religious-nationalist coalition, said Israeli institutions were less predictable given the government’s handling of events.
“The broad nature of the originally proposed changes and the speed with which the government attempted to push them through
through… without an attempt to achieve broad consensus point to a weakening of institutions,” the agency said.
Netanyahu, under pressure at home and abroad, agreed to delay the review to try to negotiate a middle ground, but Moody’s, echoing opposition lawmakers in Israel, said: “It is far from clear whether a compromise can be found. commitment”.
On the bright side, he said, the country’s positive economic and fiscal trends remain, should a solution be found.
Israel’s central bank and senior finance ministry officials have warned that the judicial reform could affect investor confidence and hurt the economy.
Critics, ranging from the business elite to former military officers, say the reform will harm democracy and hand unchecked powers to the government of the day.
Netanyahu, who is on trial on corruption charges that he denies, says the changes are needed to rein in activist judges who have interfered in political decision-making.
Israel’s economy grew 6.4% faster than expected in 2022, though growth is expected to fall below 3% this year amid sharp central bank interest rate hikes aimed at combating high inflation.