On Monday Stanley Fischer proved that he has become fully naturalized: He threatened to overturn the tables - and everyone rushed to meet his demands. The prime minister called the finance minister, who gave new instructions to the official in charge of wages, who rushed to put a hold on letters sent to all Bank of Israel employees inviting them to a hearing. The big crisis was averted, or at least put off, and Fischer withdrew his threat. Unlike a typical Israeli, however, Fischer did not rush to criticize - but he was certainly forceful, in a buttoned-up way. The justified attempt to apply wage terms to Bank of Israel employees - terms that would do away with the ridiculous benefits of the past, and require that some of them give back money to the state that was allegedly received illegally - was withdrawn out of fear of Fischer.
Reactions to Fischer's announcement of a press conference reflect not only his personal power and excellent negotiating position, but also the growing impact of economic considerations on the prime minister's decision-making process. Ehud Olmert was frightened by the hints of the Bank of Israel governor because he understood the potentially grave impact his resignation would have on the stock market and on Israel's economic image (if indeed this was the purpose of the press conference).
The prime minister decided that instead of throwing the economy into crisis, it would be best to respond to the governor's expectations, even if it means helping to miss an opportunity to teach the Bank of Israel and other civil service employees a lesson: that they have exceeded the limits in their salary terms. Olmert here had followed in the footsteps of his predecessor. It turns out that major government decisions, including those in the diplomatic and the defense arenas, were based in recent years on economic considerations and Israel's dependence on the rules of the game dictated by globalization.
For example, Ariel Sharon's policy of restraint in view of the growing strength of Hezbollah in southern Lebanon was influenced, to a great if not decisive extent, by his wish to preserve and nourish tourism along the northern border. The disengagement from the Gaza Strip was also justified by the former prime minister, in part, on the basis of its contribution to bolstering the national economy and creating a positive atmosphere for investments. Sharon's call on President Katsav to disperse the Knesset (following the prime minister's decision to leave the Likud in November 2005), was in tandem with Bank of Israel Governor Stanley Fischer's call for early elections to prevent uncertainty, which would potentially harm the economy. The enormous support for Sharon, as reflected in the polls prior to his hospitalization, was interpreted as stemming in part from his government's economic policies (conducted by Benjamin Netanyahu at the treasury) and from the conditions they created for attracting investors and for the stock market boom.
On the eve of his illness, Sharon was presented as a leader capable of forming a stable government that would begin a historic turnabout in Israel's relations with the Palestinians. This expectation was enough to boost stocks and engulf the country in an atmosphere of economic optimism. The statements released by Hadassah Hospital following Sharon's first stroke were also influenced by the economic indexes. The prime minister's aides convinced the hospital director, Prof. Shlomo Mor-Yosef, to take into account the possible implications that his statements may have on the Israeli economy and its international image.
This is not a new phenomenon: The stock market always responds to security and political developments. The Haaretz archive offers a plethora of reminders: sharp drops following the resignation of Netanyahu from the Finance Ministry in August 2005, the suicide bombing at Park Hotel in March 2002, the lynching of two IDF reservists in Ramallah in October 2000, and so on. Nonetheless, the prime ministers in the last six years, Sharon and now Olmert, appear to be a lot more attentive than their predecessors to the movement of the stocks and to the opinions of leading experts on the economy. While it may look bad at first glance, there is something positive in this sort of attention: It expresses an aspiration for normalcy, demonstrates Israel's economic dependence on the rules of the global age and it suggests hope that its enemies will also be swept up in it.
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