On Monday, the Knesset, Israel’s parliament, voted to limit judicial review and passed the “Reasonableness Law.” Practically speaking, the law guts the courts’ ability to scrutinize the government’s actions for corruption and rationality.
This immediately sent Israel’s stock market and currency into a swoon, while destabilizing the country’s military and foreign relations. The legislation is also a stick in U.S. President Joe Biden’s eye. As late as Sunday, he asked Israeli Prime Minister Benjamin Netanyahu to hit the brakes, to no avail.
After the vote, the White House issued a statement expressing disappointment but made no mention of the prime minister. “It is unfortunate that the vote today took place with the slimmest possible majority.”
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To Israeli ears, Biden sounds like a wimp. (On Tuesday, Netanyahu’s brother aimed a salvo at Biden’s mental acuity, which he was forced to walk back hours later.)
Regardless, the Jewish State is about to endure a Brexit moment of its own. A “threat now hovers over the market,” according to Yaniv Pagut, vice president of the Trading, Derivatives, and Indices Department at the Tel Aviv Stock Exchange. Rating agency downgrades are distinct possibilities.
Morgan Stanley and Citigroup have since weighed in against Israeli government-issued debt. And on Tuesday, Moody’s reported, “There is significant risk that political and social tensions… will continue, with negative consequences for Israel’s economy and security situation."
Still, everyone had been warned. Netanyahu, an MIT graduate, walked into the morass with eyes wide open. Now he is doubling down and daring everyone in sight.
For seven months, hundreds of thousands of Israelis have regularly and dramatically protested the planned overhaul. Over the past week, opposition reached a new crescendo as more than 10,000 Israeli reservists, including members of the air force and intelligence branches, announced they would not report for duty if the legislation passed.
Crunch time has arrived. With the threat of a war with Iran growing, fewer available pilots translates into limited capacities. “The professionals and the conscripts are there to hold to the line, but you need the reservists to win the war,” said Chuck Freilich, a former deputy head of Israel’s National Security Council, now a senior fellow at Israel’s Institute for National Security Studies (INSS).
Practically speaking, the judicial overhaul pits the defense establishment against the government and its right-wing coalition partners. This is a Brexit for Jews moment. The overhaul is driven, in part, by resentments toward the courts from settlers, populists, and ultra-Orthodox Jews, the country’s analog to MAGA voters. Indeed, the far-right U.S. outlet Breitbart has given them its blessing.
On Sunday, the INSS warned that the “people’s army” stood in “danger of dissolution” and called an “immediate halt to the judicial overhaul legislation.” It also posited that the legislation and its aftermath could “result in a weakened military and lead Israel toward a precarious reality that jeopardizes the regional deterrence equation.”
INSS is far from alone. Yossi Cohen, a former head of the Mossad and a Netanyahu ally, sounded a similar note. In a recent op-ed, he wrote that the overhaul “endangers the national security resilience of the State of Israel in the immediate time frame.”
Nadav Argaman, a former director of the Shin Bet, Israel’s internal security service, likewise berated the move. “There is a prime minister here who is a prisoner of the coalition, who has lost the people.”
To be sure, Netanyahu and Co. paid his critics the same heed as they did to President Biden. Likewise, in the hours before Monday’s vote, Netanyahu refused to meet with the chief of staff of the Israeli Defense Forces, Lt. Gen. Herzi Halevi.
From the ground, things look grim. On Sunday, Halevi warned that the IDF’s cohesion had been “dangerously” affected as a result of the reservists’ action, and called on them to return to service. Ominously, he also observed that Israel stood existentially threatened without its “best” soldiers.
These latest developments will likely reverberate beyond Israel’s borders. The allure of the Abraham Accords for the Gulf States stemmed from Israel’s technological and military prowess, and its capability to act as a deterrent and counterweight to Tehran. Suddenly, Israel’s high-tech companies are eyeing a Plan B (if not the exits) and the IDF’s footing now appears uncertain.
With Israel’s military at less than 100 percent, its markets stumbling, and its people roiling in a near-civil war, the bloom is off the rose.
A shtetl with nukes, as opposed to a thriving Israel, may not be enough to assuage the concerns of Bahrain and the Emirates, Abraham Accords partners. Unlike Israel, they possess greater latitude in reaching a modus vivendi with Iran’s mullahs. From Lebanon, Hezbollah, Iran’s surrogate, sees Israel on a road to collapse.
In the run-up to the vote, David Friedman, Donald Trump’s ambassador to Israel and a Netanyahu confidant, urged caution and retweeted a message from the CEO of the neoconservative Foundation for Democracies. Friedman reminded Israelis of the threats posed by Iran, the prospect of a deal with Saudi Arabia, and the outsized role played by high-tech.
The overhaul didn’t pass his cost-benefit analysis. That says something.
The possibility of a confrontation between Jerusalem and Tehran has provided a soundtrack to the region’s tensions and history since the overthrow of the Shah and the Iranian revolution in 1979. This past spring, Gen. Yaakov Amidror, a former National Security chief under Netanyahu, characterized war between Israel and Iran as increasingly likely, and urged Israel to gear up.
“We need to prepare for war,” he declared in a radio interview. “It’s possible that we will reach a point where we have to attack Iran even without American assistance.’” To be sure, Amidror is also acutely aware of the cultural divides that undergird the judicial overhaul and the opposition. He left the army in 2002 after referring to non-religious Israelis as “Hebrew-speaking gentiles.”
Cultural resentments still get the better of his cool. Hours before the vote, he lambasted on live radio the reservists who expressed their refusal to serve. At the same time, he equivocated on Netanyahu’s and his coalition’s role in bringing Israel to the precipice. But in the end, he did not dispute that the IDF will be worse off.
The Israel stock market slides, the Shekel loses value, and interest rates rise. Whether Israel can regain the confidence of others is debatable. Right now, Netanyahu is looking more like Liz Truss, the U.K.’s former hapless prime minister, than the guy who lectures U.S. presidents and holds court with the donor class.
The prime minister who helped make Israel synonymous with “Start-Up Nation” may now be dragging it down with him.
