Israel's Degraded Credit Rating Exposes Netanyahu's Hollow Vow of 'Victory' in Gaza
At first glance, the decision taken by Moody's credit rating agency to downgrade Israel's creditworthiness, with its attendant negative outlook, appears to be an almost robotic self-evident one. War is a costly venture that undermines stability while increasing expenses and debts.
The clear warning issued by the credit rating agency with regard to the growing risks on the northern front place the economic parameters within an ostensibly simple formula – the more the war intensifies and spreads, the lower the credit rating.
Thus, Prime Minister Benjamin Netanyahu allowed himself to respond with his own robotic statement, linking the rating to the very fact that a war is being waged. "Israel's economy is strong. The reduced credit rating is not connected to the economy, it all stems from the fact that we are at war. The rating will return as soon as we win the war, and we will," said his statement.
Every word in this response – pretend to be surprised – is a criminal dissimulation. First of all, Moody's decision obviously relates not just to the fact that a war is taking place, but to the manner in which it is being conducted by the government Netanyahu is leading, and to the manner in which the economy is being managed at a time of war by his government and by state institutions – and these institutions, namely the Bank of Israel, actually garnered praise, as did the resilience of the Israeli public.
Furthermore, the credit rating agency continues to warn against the dangers of the judicial overhaul which have not subsided under Netanyahu's government, an aspect which the prime minister is only too happy to cover up. However, the truly significant gap between the regrettable decision taken by the American credit rating agency and the prime minister's response relates not to present events, but to the future.
In its decision, Moody's repeatedly refers to the fact that even if the present round of hostilities does subside or halt temporarily, what is striking in its absence is a long-term solution that will restore calm and security after a blow of such proportions was sustained. In other words, as well explained by Avi Waksman, Moody's representatives talked with senior decision makers in Israel before reaching the grim conclusion that these people were not proposing any horizon, and that they have no sustainable solution other than band-aids.
FILE PHOTO: Signage is seen outside the Moody's Corporation headquarters in Manhattan.Credit: Andrew Kelly/Reuters
Moody's noted that "while fighting in Gaza may diminish in intensity or pause, there is currently no agreement to end the hostilities durably and no agreement on a longer-term plan that would fully restore and eventually strengthen security for Israel."
Their conclusion in the face of this problem was that "the ongoing military conflict with Hamas, its aftermath and wider consequences materially raise political risk for Israel as well as weaken its executive and legislative institutions and its fiscal strength, for the foreseeable future."
Moody's believes, and rightly so, that the proposed deal for releasing hostages in exchange for halting the war is a point solution to a much deeper problem, constituting but one more round in an interminable war. The agency specifically emphasizes the Israeli government's rejection of diplomatic proposals, spearheaded by the U.S., for dealing with the aftermath of the war in Gaza.
Credit: IDF Spokesperson
The justified concerns expressed by Moody's with regard to the absence of a diplomatic horizon have exposed the cruel lie Netanyahu proposes: "The rating will increase as soon as we achieve victory in this war," he said.
"Victory" is a totally hollow word when there is no horizon indicating what such a "victory" will look like. The return of the hostages? The disappearance of Gaza? A diplomatic agreement? No, Netanyahu's true solution is for the country to "live by the sword" forever.
This even slipped out explicitly on one occasion, nine years ago, in a discussion at the Knesset's Foreign Affairs and Defense Committee. "They ask me if we will live by our sword forever – my answer is yes," he said then.
This is the tragic horizon Moody's is now warning us of. The negative outlook proposed by Netanyahu, to live by our sword perennially, has its costs. Only some of these are economic ones.