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Bank of Israel governor Stanley Fischer seems like a genteel, courteous man who would never raise his voice. But it seems that isn't precisely so.

Last Thursday a meeting was held in Tel Aviv on the employment agreements at the Bank of Israel. The meeting was chaired by Fischer and Finance Minister Avraham Hirchson. The discussion centered on two issues blocking signature on a wage agreement: the two-rank promotion that central bank workers receive when they retire, and their retirement bonus.

These retirement terms are completely insane. They have no parallel anywhere in Israel's civil service. The two-rank promotion instantly adds 30% to their pension payments and they also get about NIS 2 million from the central bank, broken down into several sections: three months "adjustment" at full pay, redemption of three (!) types of sabbatical leaves, compensation for unutilized sick days calculated on a basis of 45 days a year with a pay hike per day of 20%, redemption of regular vacation, special vacation and suspended vacation, and an increase in the period of work based on the worker's health, or on the governor's decision.

If that isn't corruption, what is?

The Bank of Israel trills about narrowing social gaps and fighting poverty. That is moving. But the bank workers themselves are responsible for some of those gaps.

When a department head at a ministry paid NIS 7,000 a month gets overpaid by NIS 200, he gets hounded to earth by the wages director at the treasury until he returns the money, to the last agora. So why is it wrong to demand restitution by former central bank officials who have retired?

The problem is that the central bank director-general, Jacob Danon, sometimes acts like he's a union leader, and the governor has been aggressively acting to block the treasury. He demands, loudly, that it capitulate to his dictate, and even hints that he'll resign unless the employment agreement is signed soon, and unless the treasury drops the hot potato of the central bank retirees. Why is he protecting them?

At one of the meetings Fischer said, "Unless it's resolved, I will have to make a decision." And the political echelon, led by Olmert, quaked. The prime minister is terrified that fischer really will quit and maybe even return to the U.S. He would pay a lot for that not to happen.

Electric shock

Meanwhile, over at the National Labor Tribunal, it decided to side with the Finance Ministry and slash the wages of dozens of top people at the Israel Electric Corporation. They stand to lose thousands this very month, from salaries of NIS 40,000 a month and more.

This story began in 2004, when the IEC received notice from the treasury's wages director that all the workers had to return overpaid monies discovered by the State Comptroller to the treasury. But the years passed and the uility's management dragged its feet. It was not thrilled at the idea of pay cuts, especially as the biggest slices were to come from themselves.

When Eli Cohen took over as wages director, he discovered that hot potato and decided to show that he wasn't afraid of the big bad IEC union, one of the most powerful in the land.

As could have been expected, the workers commenced sanctions and sued at the Haifa Labor Tribunal, which ruled in their favor three weeks ago. But Cohen did not relent. He went to a higher labor court, which ordered the Haifa court to reopen the case. The Haifa Tribunal unexpectedly reversed and ruled that the illegal additions should be cut from the salaries of 160 top people.

The real problem is that salaries are only a small part of the battle against the IEC. The big part is reform, which should break the company into units and defang its monopolistic power.

Yet one can see connections. Wages can be used as a lever: the treasury could waive the cuts in exchange for support for reform. It's a win-win.