Moody’s: Political Crisis Could Harm Credit Rating

A statement from the Moody’s credit rating agency on Tuesday served to underline the urgency of resolving Israel’s political uncertainties in a timely manner.

Israel’s A1 with a positive outlook cannot withstand unlimited stress generated by the political situation, the company warned.

“The ability and willingness of the next government to address the difficult fiscal trajectory in a timely manner, such that the material debt reduction gains of the past decade are broadly preserved, will be an important driver of our assessment of the sovereign credit profile.”

Moody’s further indicated that not just a new government, but a strong and effective one, is what is needed to preserve Israel’s high rating.

“The failure to form a new government, or the formation of a disparate coalition unable to command the internal consensus needed to advance new fiscal measures, would present a risk to Israel’s credit profile.”

Earlier in the week, Finance Minister Moshe Kahlon warned that if coalition talks fail and a third election is called, it would be a disaster for the Israeli economy, which he said has not functioned properly since last December, when Prime Minister Binyamin Netanyahu‏‏ called for elections in April.