Moody’s Takes Sides in Israeli Politics

Last week, Moody’s Investors Service issued something unusual for a credit-ratings firm: a stark warning about a country’s constitutional structure. Everyone seems to have an opinion on the new Israeli government’s proposed judicial reforms, which would limit the Supreme Court’s ability to strike down legislation, end its effective veto on political appointments and reduce its role in choosing justices’ successors. Moody’s, along with Fitch Ratings and S&P, has said that such reforms threaten the country’s relatively high credit rating. These statements are part of a troubling trend of supposedly neutral experts weighing in on matters they have neither the expertise nor the authority to evaluate.

Moody’s basic argument is that the proposed reforms will harm the country’s system of checks and balances by weakening the judiciary. This, Moody’s contends, is a negative credit factor and could lead to capital flight from Israel’s all-important tech sector. As both an economic and a judicial theory, this argument makes little sense.