Israel began to feel the impact on Tuesday of a Bill removing the power of the supreme court to overrule government actions it considers unreasonable.
The economic effects of Monday’s vote were underlined when the international credit rating company Moody’s published a damning report on Israel’s economy.
“There is a significant risk that the political and social tensions over judicial reform will continue and lead to negative consequences for Israel’s economy and its security situation,” the Moody’s report said.
It is expected that Moody’s will downgrade Israel’s credit rating in the coming months. Israel’s rating is currently one of the world’s best, ranging from A to AA. This puts Israel among the top 20 countries globally in terms of offering security that the country will repay loans fully and on time.
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Earlier on Tuesday, Morgan Stanley downgraded Israel’s sovereign credit to a “dislike stance”.
“We see increased uncertainty about the economic outlook in the coming months and risks becoming skewed to our adverse scenario,” said a research note by analysts at the US investment bank.
In advance of the Moody’s report, prime minister Binyamin Netanyahu and finance minister Bezalel Smotrich issued a joint statement insisting the Israeli economy remains robust.
“This is a temporary response. When the dust clears it will become clear that Israel’s economy is very strong,” they said. “The Israeli economy is based on solid foundations and will continue to grow under an experienced leadership that is leading a responsible economy policy.”
Israeli stocks and the shekel continued to lose value in response to Mr Netanyahu’s right-wing government’s controversial judicial overhaul, which opponents claim undermines Israeli democracy.
[ Q&A: Why are people protesting in Israel and what happens next?Opens in new window ]
Military reservists on Tuesday began fulfilling their threat not to report for army duty, and the military warned that within weeks the army’s combat effectiveness will be impaired.
Opposition leader Yair Lapid called on reservists to delay acting on their threats until the high court has heard petitions against the law.
Supreme court president Esther Hayut and several other supreme court justices cut short an official visit to Germany and returned to Israel urgently to consider the petitions. A large panel of at least 11 supreme court justices is expected to consider the petitions but rulings on petitions that address such weighty issues often take many months.
The Israel Medical Association observed a one-day strike on Tuesday to protest against the law, putting hospitals and clinics on emergency footing.
Angry protests erupted across Israel on Monday night following the Knesset vote. Clashes broke out in several locations between protesters and police who were unable to disperse the crowds blocking Tel Aviv’s main Ayalon highway for hours. Thirty two demonstrators and 12 police officers were wounded.
An EU official quoted by the Jerusalem Post on Tuesday expressed concern over the judicial overhaul.
“Similar to the thousands of demonstrators, the EU is concerned that this Bill would limit the supreme court’s ability to conduct judicial reviews of government decisions. EU-Israel relations are based on shared values, such as democracy, rule of law, including an independent judiciary, and human rights. It is important that these values are preserved,” the official stated.
An ad was taken out in Israel’s three largest newspapers on Tuesday paid for by high-tech workers. At the bottom of a black front page was the message: “A black day for Israeli democracy”.
