Fischer warns Bibi to cooperate

Stella Korin-Lieber

The Bank of Israel's target of "Strengthening of the role of the Governor as advisor to the government on economic issues," is a veiled warning.

"Strengthening of the role of the Governor as advisor to the government on economic issues," says the highly significant and bold sentence, modestly tucked away in the Bank of Israel 2013 work plan and budget, which was published today. This is one of the nine main goals among "the Bank’s main targets for the coming years as determined by management." This one unclear target was among a range of technical targets dealing with upgrading, promoting reforms, development, issuing currency and implementation.

This short line is in fact an email message sent directly from Governor of the Bank of Israel Stanley Fischer to just one man - the next Prime Minister, probably Benjamin Netanyahu. This line, sharply formulated but polite and restrained as is Fischer's way conceals a clear and immediate warning, and even a threat. It says watch out the next prime minister in case you've forgotten: Israel has a central bank governor who is also a senior economic advisor to the government. It is worth listening to him because if you don't he will operate independently within the legal and traditional infrastructure at his disposal to "strengthen" his position. He will do this and say exactly what he thinks and if necessary go above the head of the next prime minister.

In other words, if the Prime Minister and the Bank of Israel Governor continue to work on two parallel tracks as has happened over the past few months, and if the next Prime Minister does not listen and work for the real needs of the economy as formulated by the senior economic advisor - then the Governor will feel free to voice his opinions and warnings directly to the public, which has trusted him for years as the "responsible adult" of the Israeli economy.

The "target" of strengthening the standing of the Governor was published after the announcement of the Bank of Israel about cutting the interest rate and a murky growth forecast for the coming year. The new "target" was published close to the words that Fischer said this morning to the Knesset Finance Committee. "We will have to deal with the budget after the elections and it won't be easy. The government may need to raise taxes. According to expenditure restrictions we will be about NIS 15 billion above the real rise of the permitted budget."

Fischer is concerned about the present situation and even more about what will happen in the coming months. He is concerned about the politicians ignoring the signs of a slowdown in the Israeli and the global economy and the abundance of false money that the government is throwing into the economy. He is even more worried about what will happen after the elections. The need for the next Prime Minister to put together a coalition will result in surrender to blackmail by parties and new commitments worth billions will be added the billions in commitments already made.

The Governor is concerned about the continued ignoring of an economy that is galloping into recession. The deficit is growing, revenues are falling, expenditures are rising, and real estate prices continue to rise because of a lack of supply.

The near future, the gifts, the generous concessions to future coalition members may bring the economy into a tailspin. The party is over. Even if there are signs that the US economy is more stable the global crisis is not about to end and its impact on the Israeli economy is becoming more severe. This government is too busy to notice this and this will result in Israel having to cope with its very own fiscal cliff.

So the Bank of Israel this morning sent a printed message to the next Prime Minister: call Fischer sit with him again and seek his counsel. Seriously. It's better that we work together than each one of us separately. Otherwise he will work to strengthen his role, and that won't be pleasant.

Published by Globes [online], Israel business news - - on December 25, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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