Israel’s government has passed the first part of its legal overhaul. The law’s ripples are dramatic

The Israeli government has passed the first major piece of legislation in Prime Minister Benjamin Netanyahu’s plan to overhaul the country’s legal system — part of a broader plan that has triggered nationwide protests, divided the country and rattled the powerful military and influential business community.

The plan seeks to weaken the country’s Supreme Court and transfer more powers to the parliament. Supporters say Israel’s unelected judges wield too much power. But opponents say the judges play an important oversight role, and that the plan will push Israel toward autocratic rule.

Despite the fraught atmosphere, Netanyahu’s allies say they are moving forward on the overhaul.

Here’s a look at how the overhaul could affect Israel in the coming months:

Why is the country so divided?

Netanyahu, who is on trial for corruption charges, has long been a polarizing leader. His government took office in December, after narrowly winning the country’s fifth election in under four years. All of those elections focused on Netanyahu’s fitness to rule.

These divisions have been reflected in the debate about the overhaul — stretching across religious, class and ethnic lines.

The anti-government protesters come largely from Israel’s urban middle class and include doctors, academics, military officers and business leaders. Netanyahu’s supporters tend to be poorer, more religious and include residents of West Bank settlements and outlying areas. Many are working-class Jews of Mizrahi, or Middle Eastern, descent who see themselves marginalized by an Ashkenazi, or European, elite.

Following the Knesset vote that pushed the law through on Monday, Netanyahu appealed for unity and dialogue. But his opponents rejected the offer as insincere and vowed to continue the protests.

“The morning after, we emerge to an Israel with internal battle lines drawn, an Israel potentially at war with itself, a government certainly at war with much, perhaps most, of the people,” wrote David Horovitz, founding editor of the Times of Israel news site.

Simcha Rothman, the Israeli lawmaker who has spearheaded the overhaul, said he hopes the opposition will be “responsible” and return to negotiations. But he made clear he is not done.

“We have the majority,” he said, referring to the parliamentary coalition. “The majority of the people in Israel still support the reform.”

Will the military’s readiness be affected?

Thousands of military reservists have threatened to stop reporting for duty now that the first law has been passed. The military depends heavily on these volunteer reservists, particularly air force pilots, intelligence officers and members of other specialized units.

Current and former military brass have warned that if the reservists follow through on their threats, the military’s ability to function in a national emergency could be compromised.

“If we don’t have a strong and united defense force, if Israel’s best do not serve in the IDF, we will no longer be able to exist as a country in the region,” warned Lt. Gen. Herzi Halevi, the chief of staff.

How does this affect Israel’s relationship with the U.S?

By pushing through the new law without a broad political consensus, Netanyahu has defied the country’s closest ally, the United States, which gives Israel nearly $4 billion in annual military assistance and diplomatic backing in international forums.

In a rare public warning ahead of the vote, President Joe Biden called on the Israeli government to postpone the session and try to reach a compromise with the opposition. The White House lamented Monday’s vote result as “unfortunate.”

Analysts say the contentious plan could undermine what both countries routinely describe as shared interests and values.

Alon Pinkas, a former Israeli consul-general in New York, said that Netanyahu’s disregard for American concerns would further hurt the Israeli leader’s troubled relationship with the U.S. president.

“No one will take Netanyahu at his word,” he said.

The vote could also deepen a growing rift between the conservative Israeli government and the predominantly liberal American Jewish community. Two major groups, the American Jewish Committee and the Jewish Federations of North America, expressed deep “disappointment” over Monday’s vote.

What does this mean for the Palestinians?

Palestinians look at the unrest roiling Israel as proof of what they see as hypocrisy, saying that Israel’s ongoing, 56-year occupation of the West Bank long ago undermined Israel’s democracy.

“Palestinians see this as a contradiction, that Israelis are fighting for freedom and democracy through institutions that are inherently preventing an entire people from freedom and democracy,” said Inès Abdel Razek, executive director of the Palestine Institute for Public Diplomacy, an advocacy group.

But some politicians and analysts warn that the potential consequences of the judicial changes have a deeper reach into the West Bank than the public might think, eroding the main check on a far-right coalition bent on expanding settlements and increasing Israel’s control over the occupied territory.

“This is a dangerous development for us,” said Mustafa Barghouti, a veteran Palestinian activist.

Will the protests continue?

After seven months of mass demonstrations against the plan, the grassroots protest movement says it has no plans on stopping. Monday’s vote was met by fierce protests across Israel and unprecedented clashes between protesters and the police.

Yohanan Plesner, president of the Israel Democracy Institute, a Jerusalem think tank, said the “protests are not going anywhere, especially because the government has clearly stated that this is just phase one.”

Josh Drill, a spokesperson for the protest movement, called for new measures, such as not paying taxes. He also called on the U.S. and the American Jewish community to reconsider financial support for the Israeli government and instead donate to advocacy groups aligned with the movement.

“How many statements can the U.S. administration put out that they’re distraught or that they’re worried? Come on, that’s not actually doing anything,” he said.

Will this put Israel’s economy at risk?

Monday’s vote sent the Israeli currency and stock market tumbling and yielded warnings from the Moody’s credit rating agency of “negative consequences” for the economy.

Netanyahu dismissed the negative reactions as a “momentary response” and insisted: “When the dust clears, it will be clear that the Israeli economy is very strong.”

But many experts believe the damage to the economy could be long-lasting — with foreign investors potentially deterred by fears that a weak judiciary could open the door to corruption and hurt the business environment.

The threat is particularly acute in in Israel’s high-tech sector — a key portion of Israel’s economy. On Tuesday, leading Israeli newspapers covered their front pages in black — an ominous image that was paid for by an alliance of high-tech companies.

“A black day for Israeli democracy,” the ad read.

Yannay Spitzer, an economist at Israel’s Hebrew University, said Israeli stock prices have lagged behind global indexes since the plan was unveiled. This trend, he said, “cannot be accounted for by ordinary market developments.”

“Israel is headed to become an economically backward country with civil strife,” Spitzer predicted.

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