Will Moody’s downgraded outlook for Israel finally end Netanyahu’s judicial overhaul?
Friday’s decision by international ratings agency Moody’s to downgrade the credit outlook of the Israeli economy from “positive” to “stable,” as a result of the continuing turmoil over the judicial overhaul, was the nail in the coffin of the Netanyahu government’s plans.
There was much obfuscation, false aggrandizement and denial of reality in the official statement Prime Minister Benjamin Netanyahu and his finance minister, Bezalel Smotrich, published in response as soon as Shabbat ended on Saturday night. They promised to “continue to lead a responsible financial, security and social policy, and do everything for a stable, growing and prospering Israeli economy.”
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One thing they didn’t say, however, was that they still intended to pass the constitutional changes – because, as reckless as Netanyahu has been since returning to power last year, he’s not going to continue with the legislation after being warned publicly by one of the three major credit agencies that it could lead them to cut Israel’s rating. Even if he believes they’re wrong, there’s a limit as to how far he will tempt fate.
The Moody’s report is actually good for Netanyahu, who reached the conclusion weeks ago that the legislation was more trouble than it was worth. Since then, he’s been trying to convince his more radical coalition partners to join in him slowly climbing down.
He said as much last Tuesday in a conciliatory appearance on Channel 14’s “The Patriots,” where he lectured a panel of sycophants that “Israel is surrounded by enemies” and therefore this was no time to rush through controversial laws and instead he was determined to seek broad consensus.
And he had basically admitted it a day earlier, in a press conference where he tried to deny that he had ever meant to fire his defense minister, Yoav Gallant, for speaking out against the judicial plan.
In fact, it has emerged in a number of reports that the very morning after the “firing” of Gallant, Netanyahu was conspiring with the country’s trade union bosses, discreetly hoping they would announce a general strike in order to give him an excuse to suspend the legislation that very day. As he did.
The general strike was Netanyahu’s alibi three weeks ago. The Moody’s report is his alibi going forward.
Netanyahu cannot totally capitulate in public and announce that he’s shelving the “legal reform.” That would be a damaging admission of weakness and would open him up to attacks from the parts of Likud and his coalition partners who are still vocally calling for – and promising their respective constituencies – that it will still pass.
Instead of admitting defeat, he will try to string along the “dialogue” with the main centrist opposition parties, under the auspices of President Isaac Herzog, for as long as possible. Herzog will certainly help him do this in the interests of trying to diffuse the internal conflict that has been tearing Israeli society apart for months.
Meanwhile, Netanyahu is already trying to divert his partners toward other matters that will come on the parliamentary agenda the moment the Knesset returns in two weeks. The belated state budget for 2023-2024 will occupy them in the first weeks of the session, with major allocations for matters close to the coalition parties’ hearts – especially the funding for the new pseudo-ministries they received when the government was formed. Netanyahu reckons that the hundreds of millions of shekels they will then be able to distribute will go a long way to assuaging their disappointment in failing to eviscerate the Supreme Court.
The other major piece of legislation on hand is the law regulating the exemption of ultra-Orthodox yeshiva students from military service. The government has a deadline from the High Court of Justice to pass the new law by May 29, and will have its work cut out with that and the budget until then.
Come June, there will be those in the coalition demanding that they focus once more on the judicial changes. However, Netanyahu is banking that the main motivation will have dissipated by then and there will be little appetite by that point for bringing Israel back to the brink of chaos.
Technically, there will be enough time – exactly two months – until the end of the session. But many of the coalition lawmakers will be yearning for their summer vacation by then.
The main battle, at least when the legislation was suspended three weeks ago, was over the law changing the composition of the Judicial Appointments Committee. The real issue there was over Justice Minister Yariv Levin’s dream of changing the “seniority rule” for the appointment of the Supreme Court president.
Current President Esther Hayut reaches the mandatory retirement age of 70 on October 26, just 11 days after the Knesset winter session begins. She is expected to be replaced by the relatively liberal Isaac Amit, who will have five more years until he turns 70.
Levin and his die-hard allies may have one more window of opportunity to change that in the summer session. If they miss that window, the whole issue becomes irrelevant until 2028. But it looks as though Netanyahu is already trying to close the window on them. And if they insist on trying to jump through it, he will have the Moody’s report to brandish in their faces and demand they slow down.