DAY 537 of the War: Protests Against Hamas in Gaza, Netanyahu Attacks the “Deep State” Again, Moody's Issues Warning on Israel's Credit Rating

Tel Aviv Diary, March 27, 2025

For the second consecutive day, demonstrations have erupted in Gaza against Hamas. I refrained from writing about this yesterday, despite early indications of unrest, because the scope and significance of the events remains unknown. Demonstrations are now occurring across multiple locations in Gaza. Estimates indicate that thousands may be participating, but exact numbers are difficult to confirm.

As of tonight, protests have spread to nine locations across Gaza. One explanation for the timing of these demonstrations—beyond the extended suffering Gazans have endured due to the conflict—is that recent Israeli strikes have targeted individuals who typically help Hamas maintain control over the population. Furthermore, Israel is now focusing on anyone identified as a Hamas terrorist, significantly limiting Hamas’s ability to suppress dissent.

In the meantime, some Gazans have begun leaving to seek opportunities elsewhere. A hundred have opted to go to Indonesia for construction work, (instead of in Israel), and others are departing for a variety of destinations. Will it matter if a few thousand leave? I doubt it. However, if the demonstrations against Hamas continue to grow, there is a real possibility that their rule could come under threat. Reports tonight indicate that armed family “gangs” have joined the protests.

The real question is: What will happen if Hamas decides to respond violently to the demonstrators? Despite the uncertainty, this development could be seen as the first sign of optimism in a long time.

This morning, rockets were fired from Gaza at Israeli towns near the Gaza border. One rocket was intercepted, the second fell in an open field. Tonight, rockets from Gaza were fired toward Beersheva and were all intercepted.

NETANYAHU SHIFTS FOCUS FROM ISRAELI ARAB VIOLENCE TO “DEEP STATE”

Prime Minister Netanyahu addressed a special Knesset session focused on violence and homicides in Arab-Israeli communities. Although he briefly addressed the issue, Netanyahu once again quickly shifted focus to attack the “Deep State” and critics of his policies.

Democracy isn't at risk, the rule of bureaucrats and the ‘Deep State’ is. When I say the rule of bureaucrats, I do not mean the tens of thousands of public workers who do their jobs faithfully, but rather a group of bureaucrats who want to preserve the existing centers of power," he added.

Democracy is, first and foremost, rule by the people – not rule by bureaucrats, not rule by ex-leaders, not rule by the news studios, said the Prime Minister.

Israel is a free country, and people are allowed to protest here. But we are witnessing your protests – blocking roads, setting fires, assaulting police officers, unlawfully disrupting the lives of millions of citizens... explicit death threats against the prime minister and his family, as well as against other senior officials.

We are witnessing things we haven't seen before – violence against elected officials. We are hearing more and more about people being sent, sometimes even paid, to confront them in restaurants, show up at their homes, and slash tires at their doorsteps, said Netanyahu.

DIVISIVE JUDICIAL APPOINTMENT LAW

One of the policies currently under review in the Knesset is the passage of a law to change how judges are selected. The new plan introduces two significant changes. Firstly, it calls for replacement of the two Bar Association representatives on the Judicial Selection Committee with two political appointees—one from the government and one from the opposition. Secondly, the new law reduces the vote threshold needed to appoint a Supreme Court justice, effectively removing the current justices’ ability to veto a candidate they deem unfit. Critics are concerned because this plan is likely to politicize the court system.

This contentious law is expected to be approved tomorrow. The law's only saving grace is that it is scheduled for implementation in the next Knesset session—meaning that if this government is no longer in power, the law could be repealed before it causes any significant harm. However, I fear that regardless of who holds office, once politicians gain power, they are reluctant to relinquish it. Tonight, tens of thousands are demonstrating near the Knesset.

KEITH SIEGEL’S PANCAKES

For dinner tonight, my wife, Milo, and I had the pleasure of visiting a pop-up pancake restaurant created by former hostages Keith and Aviva Siegel and their family at Sarona Market, close to home. The line to order was long, but it moved quickly. The pancakes, accompanied covered with whipped cream and fresh strawberries, were available by making a donation (in an amount of one's choosing), which goes towards the rebuilding of Kfar Aza—where Keith, and his wife Aviva lived until October 7. Keith, his wife, and their daughter Shir—were present at the restaurant, helping out.

On the evening news, Shir shared that when the opportunity to open the restaurant was offered, they immediately agreed, determined to keep the issue of the hostages at the forefront of public consciousness—until all 59 are back home.

From the Siegel family to the broader family of Israel, Keith’s House of Pancakes stands as a beacon of sweet hope amidst the frustration and despair of these challenging times. Why the government isn’t doing more to secure the hostages return home remains an unanswered question.

If you are in Tel Aviv, you can also enjoy Keith’s pancakes tomorrow, Thursday (3/27) 10 am – 10pm, or Friday (3/28) 9 am — 4 pm.

MOODY’S CITES RISING POLITICAL RISK IN ISRAEL, KEEPS NEGATIVE OUTLOOK

Moody’s Investors Service has issued a stark warning about Israel’s economic trajectory, citing “very high political risks that have weakened economic and fiscal strength.” In its latest credit update, released Tuesday, Moody’s highlighted growing concerns over the Israeli government’s renewed push for judicial overhaul legislation and the resumption of fighting in Gaza, which together have significantly increased uncertainty surrounding Israel’s long-term economic and security outlook.

The agency noted that these developments pose particular risks to Israel’s vital high-tech sector, a major driver of growth and a key contributor to government revenues. Moody’s emphasized that such negative trends could have “potentially severe implications” for public finances and may further erode the quality of Israel’s institutions. Despite these warnings, the agency acknowledged Israel’s traditionally strong economic fundamentals, including high wealth levels and market access, but maintained a negative outlook on its credit rating. A stabilization of the outlook, Moody’s added, would depend on a clear de-escalation of regional conflicts and restored institutional functionality.

CYBERTECH

Today, I attended the CyberTech Conference, an annual event that highlights the Cybersecurity industry in Israel. Cybersecurity has been one of Israel’s major success stories over the past decade— marked notably this year by the largest industry exit