Moody’s Sovereign Risk Group, Kathryn Muhlbrunner, said in a webinar held by the international rating agency to explain the decision.
She added, “If the government were to control the appointment of Supreme Court judges, this would harm the independence of the judiciary institution. The strength of the judicial system is important, especially in a country like Israel where the government controls the judiciary.” The Knesset, the role of the president is only symbolic and the local authorities do not have much power. There are really only two branches of government, the executive branch and the judicial branch. Other checks and balances that exist in other countries are relatively weak in Israel. “
“Our main concern is for the executive to push important changes in the institutional make-up of the country so quickly and without any real dialogue – for us this is not a sign of strong institutions.”
And she continued, “The protests revealed deep differences in Israeli society that touch more than judicial reform itself.”
When asked if the demonstrations led to a credit downgrade, as the coalition claims, or if the protests prevented greater damage, she replied, “In a sense, you could say everything had a negative impact, and so we cut the rating overview. But we do.” We were certainly encouraged by the strength of the civil institutions in Israeli society, and also by the security establishment which was opposed to reforming the government.At the moment everyone is waiting to see what there are negative and positive scenarios that could happen, but it is still too early to tell.”
Moody’s announced last Friday evening that it would leave Israel’s credit rating unchanged at A1, but downgraded its credit outlook from positive to stable. This is the first time since the Covid crisis that Israel’s credit outlook has been cut. “While mass protests have prompted the government to halt legislation and seek dialogue with the opposition, the manner in which the government has attempted to implement broad reform without seeking broad consensus indicates a weakening of institutional strength,” Moody’s said.
However, Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich rejected Moody’s criticism of the deterioration of governance in Israel, claiming that the rating agency did not properly understand the situation. They said: “The fear raised by Moody’s analysts about controversy among the public and its impact on Israel’s political and economic stability is natural to anyone who is not familiar with the resilience of Israeli society.”
Published by Globes, Israel business news – en.globes.co.il – on April 17, 2023.
© Copyright Globes Publisher Itonut (1983) Ltd., 2023.
Comments are closed.