Judicial reform plans by Israel's new hard-right government could pressure the country's sovereign credit rating even as the budget remains under control, according to an S&P analyst, as could a violent escalation with Palestinians.
In an interview with Reuters, Global Ratings director Maxim Rybnikov said the agency was closely following moves Prime Minister Benjamin Netanyahu's cabinet might make in the West Bank, as well as the pledged judiciary overhaul that would cut back Supreme Court powers.
"This could present downside risks (to Israel's ratings), upsetting the current equilibrium," he said. "The primary concern for us would be the ... security situation which could be undermined in a scenario of more hardline policies."
The past year has seen some of the worst violence in the West Bank in years. Netanyahu's coalition government, sworn in last month, has promised to strengthen Israel's settlements on the land that Palestinians seek for a state.
The cabinet also includes partners who advocate for the territory's annexation.
"If the announced judicial system changes set a trend for a weakening Israel's institutional arrangements and existing checks and balances this could in the future present downside risks to the ratings. But we are not there yet," he said.
"Hardline rhetoric that undermines the fragile situation in the West Bank could generate risks as well," Rybnikov said "If we see more protests, this is not going to be good news also for the economy."
The government's far-reaching proposal regarding the judiciary has ignited a firestorm in Israel, with former top legal officials becoming the latest to lend their voices to a growing outcry against the proposed overhaul in an unprecedented letter.
Seven former attorneys general who have served in the post throughout the last five decades — including two appointed by Netanyahu, whose justice minister is spearheading the reforms — signed a letter of protest, along with four other former senior legal officials. The letter denounced the proposed changes, saying they are destructive to the country’s legal system.
“We call on the government to withdraw the proposed plan and prevent serious harm to the justice system and the rule of law,” the letter said.
The former officials said the reforms would turn the Supreme Court, often the last recourse for Israelis and Palestinians seeking to challenge what they see as discriminatory policies, into a “pseudo-political body that would be suspected of bending the law in favor of the government.”
Associated Press contributed to this report.