"I met several times with the Governor of the Bank of Israel, and in principle, I support the Bank of Israel law. I'll try to get the bill passed as quickly as possible, so long as we don't overlook a single clause," said Knesset Finance Committee chairman MK Moshe Gafni (United Torah Judaism) at the start of today's meeting on the new Bank of Israel law.
Gafni added, "I already state that I expect problems on the matter of the setting of salaries at the Bank of Israel, but we'll try to help as much as possible."
Governor of the Bank of Israel Prof. Stanley Fischer told the Finance Committee, "I am pleased that we have reached this debate at this time. The present law was enacted when I was celebrating my Bar Mitzvah. Two important things have happened since then: the regime system has utterly changed, and the concept of the function of the central bank has also completely changed.
Fischer said that there was an inherent tension between the Ministry of Finance and the central bank for a simple reason, the Bank of Israel has a capability that the Ministry of Finance does not, but would really love to have: the ability to print money. "The Ministry of Finance would like to print money, but it can't. That's the source of tension, it happens all over the world. But we're an exception in our ability to improve. In the end, the Ministry of Finance also understood that we're proposing a law that does not make things easier for us, but improves the management of monetary policy," he said.
Fischer added, "In Israel, people are very interested in knowing how much Ms. Cohen from Hadera is making, so the issue of salaries at the Bank of Israel frequently hits the headlines. I realized that in Israel we have to accept the principle of outside oversight at the bank. This is in place, through the Director of Wages, but there is a problem because the central bank must be independent of pressure from the Ministry of Finance in order to function."
In response to Fischer's harsh comments, Deputy Director of Wages Aharon Uzieli interjected, "Nothing like this has ever happened before."
Fischer continued unperturbed, "There was a series of leaks by the Ministry of Finance about who gets what, in order to damage the Bank of Israel, especially in the eyes of the public. It wasn’t the minister of finance who leaked."
Fischer said that it was important that the Ministry of Finance should not have the last word in the matter, although it should continue to supervise salaries.
Published by Globes [online], Israel business news - www.globes-online.com - on February 23, 2010
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