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Moody’s: Election Puts Israel’s Rating at Risk

‘Israel’s political turmoil is credit negative for the sovereign because it will dampen economic confidence’

i24TV–The collapse of the government coalition and call for early elections less than two years after the last ones will have “negative ramification,” on Israel’s economy, credit ratings agency Moody’s warned in a report on Monday.

Israel has enjoyed Moody’s ‘A1’ credit rating and a similar rating of ‘A+/A-1’ from Standard & Poors (S&P) international credit ratings agency for months despite this summer’s war with Hamas in Gaza, but all it took were internal political fighting and ego-driven politicians to put this rating at risk.

“Israel’s political turmoil is credit negative for the sovereign because it will dampen economic confidence, delay the implementation of growth-boosting reforms and hinder fiscal planning for the next two years,” said the report, authored by analysts Kristin Lindow, Rebecca Karnovitz, Pamela Reyes Herrera.

“The lack of policy continuity will also hinder fiscal planning. The shortened electoral cycle is likely to lead to politicians making costly promises for tax breaks or new spending programs that will affect future budgets and be difficult to reverse,” the report also warned, adding that election-time promises could also result in irresponsible policy and rule-breaking.

“Growth-enhancing structural reforms, such as increasing economic competition by reducing the power of the country’s business monopolies and reducing tariffs on imports are likely to stall,” the report added.

Moody’s stated that Israel’s system of proportional representation is “inherently unstable, with coalition governments often formed by ideologically disparate partners. As a result, no administration lasts a full term. That said, this most recent administration was unusually short.”

Moody’s estimates that the defense budget will grow in the coming year and concludes that “Israel will need more consistent fiscal planning to keep its debt metrics on a declining path.”

Last month credit ratings agency Fitch lowered its outlook for Israel’s credit rating from “positive” to “stable.”

The swords are drawn

Meanwhile, just a week after Israel’s Prime Minister Benjamin Netanyahu declared the country should prepare for election in March, and the swords are already drawn.

HaTenuah chairwoman Tzipi Livni was slammed for surprisingly offensive remarks she made Friday against Netanyahu on an Israeli satirical program.

Discussing her agreement with Labor’s head Isaac Herzog to run on a joint list and to rotate the premiership if Labor forms the next government, Livni said on TV: “I thought that rotation, or two potential prime ministers, was better than one impotent prime minister.

“Buji [Isaac Herzog] and I have a stable relationship,” she said. “We decided in advance that we wouldn’t fight, you know, about who would wash the dishes and who would do the laundry–we’ll both take out the garbage together.”

Livni’s comments on “State of the Nation” angered Likud’s Transportation Minister Yisrael Katz and MK Miri Regev.

“Is Livni on drugs?” Katz wrote in a Facebook post. “Yesterday on ‘Matzav Ha’uma’ we saw some trippy figure hurling unprecedented insults at the prime minister, ‘Buji and I will take out the garbage,’ ‘Two potential prime ministers are better than an impotent prime minister.’ What language and what a level!”

Regev’s Facebook post said: “Here’s a joke: Tzipi Livni, who we already know is a demolition contractor, is having a hard time finding a site that will accept the garbage (waste) that she left behind in previous Knessets. This is what I’m saying, in the name of satirical freedom, in response to her unfunny remarks on ‘Matzav Ha’uma.’”

In related news, Former Likud minister Moshe Kahlon, head of the new Kulanu party, has refused an offer by Yesh Atid party chief Yair Lapid to merge the two parties in a joint ticket, daily Haaretz reported Tuesday. Recent polls have given Yesh Atid around 10 seats in the next Knesset, down from 19 in the current one. Kahlon’s new party Kulanu is polling at around 10-13 seats.

According to a recent poll conducted by Yesh Atid, a union with Kulanu would garner between 24 and 28 mandates, Channel 10 TV reported Friday. According to the Haaretz, however, Kahlon – this election’s rising star – wants to run independently, hoping perhaps for the success Lapid himself had in the last election when he burst into the political life, spreading promises of a new era, an era of new politics, clean of corruption and dealings and more socially-oriented.

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