By Maayan Lubell
JERUSALEM (Reuters) -Israel's parliament has given initial approval to a bill that limits some Supreme Court power, part of a rebooted judicial overhaul by Prime Minister Benjamin Netanyahu that has set off a deep political crisis.
The drive to change the justice system by Netanyahu's ruling coalition of nationalist and religious parties has sparked unprecedented protests, stirred concern for Israel's democratic health among its Western allies and bruised the economy.
Commanding 64 of the Knesset's 120 seats, Netanyahu's coalition on Monday won the first of three required votes for the new bill to be written into law. Protests against the bill were expected to intensify on Tuesday with nationwide disruptions pledged by organisers.
The bill seeks a curb on the Supreme Court's power to void decisions made by the government, ministers and elected officials by ruling them unreasonable. It now returns to committee for discussion and could be altered before being brought for the final votes.
Critics argue that this judicial oversight helps prevent corruption and abuses of power. Proponents say the change will facilitate effective governance by curbing court intervention.
"It is not the end of democracy, it strengthens democracy," Netanyahu said in a video statement as the Knesset debated the bill.
"Even after the amendment court independence and civil rights in Israel will not be harmed in any way. The court will continue to oversee the legality of government action and appointments," Netanyahu said.
His statement did little to calm opponents.
The sound of protesters rallying outside the Supreme Court before marching to parliament could be heard loud and clear at the nearby Bank of Israel, after governor Amir Yaron urged the government to seek broad agreements over legislation of judicial reforms that would safeguard institutional independence.
"Continued uncertainty is liable to have notable economic costs," Yaron told reporters, citing an excess depreciation of the shekel and underperformance of Israel's stock market.
Netanyahu - who is on trial on graft charges he denies - has played down economic fallout from the campaign. On Sunday he signalled impatience with the demonstrations that have flared anew.
Before the vote, a White House National Security Council spokesperson reiterated President Joe Biden's call on the government to build a consensus and keep Israel's judiciary independent.
"The president has been clear he hopes the Israeli government will work to find a genuine compromise," the spokesperson said.
Divisions over the overhaul have cut deep through Israeli society. Netanyahu had paused it for compromise talks with the opposition hosted by Israel's president Isaac Herzog, but that collapsed in June and the coalition restarted legislation.
Herzog called on the sides to resume talks in order to resolve "the fundamental issues that are tearing us apart."