The Bank of Israel is requesting an urgent ex parte injunction banning its employees from carrying out sanctions.
In its petition to the Jerusalem District Labor Court, the Bank of Israel claims that the sharp escalation in the sanctions by the bank's employees is liable to cause severe economic shocks, to point of paralyzing the financial system. This would severely limit the ability of the government, business sector and households to manage economically.
The Bank of Israel detailed the damages that would result if the sanctions persist. For example, the government will be unable to manage cash flows, including tax collection and making payments. The government will also be unable to provide reliable information about its financial situation. There is also concern that the government bond market could become rudderless and ultimately paralyzed.
Furthermore, interest rate policy will become impossible to manage, due to the paralysis of monetary policy tools; the banks will be unable to honor their obligations to depositors in an orderly manner; the system of financial transactions will cease to function; the Bank of Israel will be unable to deliver cash; credit companies, which depend on the banks, will be unable to provide their services; and will not be possible to carry out financial transactions.
The interest rate will also rise uncontrollably, price stability will vanish, inflation will resume, and a shortage of foreign currency will develop.
The Bank of Israel says the pace of deterioration cannot be predicted. The petition adds that the shutting down the Bank of Israel is an unprecedented event. There is a duty to decisively prevent the deterioration of the financial system while there is still time.
The Bank of Israel employees launched sanctions over demands for rises in pay grades retroactive to January 1, 2004. A higher pay grade generally means a significant rise in an employee's salary, between several hundred and NIS 5,000 per pay grade.
The Bank of Israel says that at a time of low inflation, general rises in pay grades, and higher salaries for employees who have been promoted, should be reduced. The Bank of Israel says promotions should be in stages.
The employees declared a labor dispute and launched sanctions, which include canceling work meetings, refusing to unload cash from containers, shutting down the capital markets unit, nd disrupting the information technology and accounts departments.
Published by Globes [online] - www.globes.co.il - on November 4, 2004