THE WEEK AHEAD: Israelis are dangerously divided over judicial overhaul, as their enemy Palestinian factions seek to reconcile with each other in Egypt

Here are the stories we are watching...

Judicial reform

Palestinian reconciliation

IDF readiness

Credit rating
Bahrain visit canceled

JUDICIAL REFORM

One of the most dramatic weeks in Israeli politics has concluded and Israelis are wondering, what comes next? Where does a deeply divided nation go from here? Prime Minister Benjamin Netanyahu told ABC News that he is “more optimistic now” than before about the chances of reaching a broad consensus on judicial reform.

Netanyahu’s premise is that after passing the controversial ‘Reasonableness Standard Bill’ in the Knesset on Monday, opposition leaders will “show responsibility and come to the middle.” He added, “Now that they can see that we are prepared to move without them… maybe we will be able to move with them.”

The atmosphere in the Jewish state is heavily charged. Military and Intelligence officials are warning of a threat to national security, while financial experts strike similar tones about the economy. On the street, Israelis are floating ideas like “separation” and “two-state solution,'' not about the Israeli-Palestinian conflict but rather in invoking the two ancient Kingdoms of Israel and Judah. Meanwhile, Israel’s regional enemies are observing the situation and taking notes.

PALESTINIAN RECONCILIATION

As Israelis continue to fight among themselves – even fearing a “civil war” – Palestinians seek to mend their inner rifts. Over one dozen Palestinian factions are expected to convene on Sunday in Cairo, Egypt for a reconciliation summit.

Palestinian Authority President Mahmoud Abbas has decided to invite the general secretaries of Fatah, Hamas, Islamic Jihad, the Palestinian People’s Party and others, in response to Israel’s latest military operation in Jenin. The meeting will reportedly aim to establish a new Palestinian national council through elections or to form a transitional national council, similar to some sort of a “unity government.”

However, the head of the Palestinian Islamic Jihad has already declared that his group will boycott the meeting. His announcement came after the PA had arrested dozens of members of the organization in the West Bank. He conditioned participation in the summit upon their release.

IDF READINESS

One of the biggest concerns around the judicial reform in Israel is the impact of the dispute over the military’s readiness for war. Last week, more than 10,000 officers and soldiers in the IDF — including more than 1,000 in the Air Force — announced they would refuse to serve to defend their country, claiming that it is “abandoning democracy” and heading towards a “dictatorship.”

This prompted U.S. Secretary of Defense Lloyd Austin to speak with Defense Minister Yoav Gallant and IDF Chief of Staff Lt.-Gen. Herzi Halevi. In the coming days, the Knesset Foreign Affairs and Defense Committee will reportedly meet confidentially to discuss the crisis in the military. Meanwhile, Iran, Hezbollah and Hamas have been closely observing the showdown in Israel and taking notes, looking for opportunities to benefit.

CREDIT RATING

Fitch Ratings, one of the "Big Three" U.S. credit rating agencies, is expected to publish its credit outlook for Israel this week. This comes after Moody’s Investors Service warned that the turmoil around the judicial reform could hurt Israel’s economy and security.

Moody’s lowered Israel’s credit outlook from “positive” to “stable" in April.

Just one day after the Reasonableness Standard Bill was passed in the Knesset, Moody’s published a warning against investing in Israel.

In a report issued last week, Moody’s noted that the situation raises the “risk of a constitutional crisis between the executive and judiciary,” and could lead to "negative consequences.”

Netanyahu defended the country’s resilience, stating: “This is a momentary reaction, when the dust settles it will become clear that Israel’s economy is very strong.”

BAHRAIN VISIT CANCELED

Israeli Foreign Minister Eli Cohen was supposed to embark on a trip to Bahrain this week for an official visit, but it was postponed by the hosts. Channel Kan 11 news reported that the official reason it was changed was due to the Bahraini King's schedule. However, the report noted the cancellation also followed National Security Minister Itamar Ben Gvir's visit to the Temple Mount with other members of the Israeli coalition, which drew backlash from several Muslim countries.

In addition, the “Negev Forum” that was supposed to convene in Morocco at the end of this month has been postponed to the end of the summer following the recent escalation between Israel and the Palestinians. The forum will include the foreign ministers of Israel, Egypt, Morocco, Bahrain, the United Arab Emirates and the United States Secretary of State.

This week we are also keeping an eye on these developing stories: