“We’re awfully close” to a global recession, said Governor of the Bank of Israel Prof. Stanley Fischer in an interview with "Bloomberg" today in Tokyo yesterday.
Fischer said the US Federal Reserve Board's decision not to set an end date or total amount for its third program of bond buying eases worries that it will run out of ammunition before achieving its goals. “It’s pretty slow right now," said Fischer. "Europe is technically in a recession, the US is predicting less than 2% growth for the next few months."
Fischer believes that although sentiment has improved lately, it is premature to say that the economic storm has passed. He declined to respond to the interviewer's question about the interest rate in Israel in the coming months, but said that Prime Minister Benjamin Netanyahu's decision to bring forward the elections before submitting a new budget was "the right move."
Fischer said that Federal Reserve Board Chairman Ben S. Bernanke's third quantitative easing (QE3) plan was beginning to have an impact on the markets. "Instead of saying that we'll buy a certain amount of bonds, for example $500 billion, to say that we'll continue buying $40 billion a month until the unemployment rate falls to a low enough level, that definitely contributes to the plan's credibility and seriousness," he said.
As for the debt crisis in Europe, Fischer said that, in his opinion, the economic aid packages were not yet completed because countries must ask for the aid and agree to all the lenders' conditions. He believes that the Eurobonds are a mistake, backing German Chancellor Angela Merkel. "In my opinion, this will be a mistake. It will not be possible to use the Eurobonds to compel countries to maintain austerity budgets. The markets will have to judge each country and assess its ability to repay. A country that fails to meet the terms - its bonds simply won't be sold," he said.
Published by Globes [online], Israel business news - www.globes-online.com - on October 15, 2012
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