By Maayan Lubell
JERUSALEM (Reuters) -Israel's parliament was scheduled on Monday to hold a first vote on 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 appeared on course to win the vote, the first of three required for the new bill to be written into law, with protests likely to intensify should that happen.
The new 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.
Critics argue that such a law invites corruption and abuses of power. Proponents say it will facilitate effective governance by curbing court intervention.
"It is not the end of democracy, it strengthens democracy," Netanyahu said in a video statement released at sundown 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 while protesters promised nationwide disruptions on Tuesday should the bill pass a first vote.
Divisions over his 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."
(Additional reporting by Steven Scheer; Writing by Maayan Lubell; Editing by Peter Graff, William Maclean)
