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Moody’s maintains Israel’s credit rating post-vote on judicial reform

Moody's did warn of "negative consequences" following the passing into law of key judicial reform legislation

Old Israeli coins. Photo by Yahav Gamliel/Flash90.
Old Israeli coins. Photo by Yahav Gamliel/Flash90.

In an unscheduled report released on Tuesday evening, global credit-rating agency Moody’s maintained Israel’s “stable” A1 rating.

Nevertheless, the agency warned of “negative consequences” for the country’s economy and security following the passing into law of key judicial reform legislation.

Meanwhile, Morgan Stanley moved to revise the Jewish state’s creditworthiness, downgrading its sovereign credit rating to a “dislike stance.”

The financial reports came after Israeli Prime Minister Benjamin Netanyahu’s coalition on Monday passed a bill to restrict judges’ use of the “reasonableness” standard. The amendment to Basic Law: The Judiciary bars “reasonableness” as a justification for judges to reverse decisions made by the Cabinet, ministers and “other elected officials as set by law.”

“Today, we performed a necessary democratic step,” Israeli Prime Minister Benjamin Netanyahu said in a speech on Monday night, explaining that realizing the will of the voters “is not the end of democracy … it is the essence of democracy.”

Moody’s said it believes “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,” according to the company.

In a joint response to the credit rating agency’s report, Netanyahu and Israeli Finance Minister Bezalel Smotrich called the negative alerts “a momentary response,” explaining that “when the dust clears, it will be clear that the Israeli economy is very strong.”

“The security industries are bursting with orders. The gas industry is increasing exports to Europe, and seven companies are now competing for tenders to explore gas in Israel at an investment worth billions. Intel is planning its largest investment outside of the U.S. ever and will invest $25 billion in Israel. NVIDIA is building a supercomputer in Israel and we are moving forward in AI, cyber and the manufacture of chips in Israel,” stated the two politicians.

The statement concluded: “The Israeli economy is based on strong fundamentals and will continue to grow under experienced leadership that is enacting a responsible economic policy.”

In April, Moody’s changed Israel’s outlook rating from “positive” to “stable” due to the judicial reform plans, while also affirming the country’s A1 rating, reflecting the country’s “strong economic growth and improving fiscal strength which Moody’s expects to continue in its baseline scenario.”

At the time, Standard & Poor maintained Israel’s AA- credit rating, which Netanyahu called an “expression of confidence in the correct economic policy that we are leading.”

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