Business and labor join forces to bend Bank of Israel's arm
Big Business is teaming up with Big Labor to ambush the governor of the Bank of Israel and force a change in the definition of the central bank's role. At present the Bank of Israel mandate is solely to keep inflation under control. No more focusing solely on inflation: they want the central bank governor to factor the status of labor and economic growth into his calculations.
The president of Israel's Manufacturers Association, Shraga Brosh, has teamed up with the chairman of the Histadrut labor federation, Ofer Eini, hoping to force Bank of Israel Governor Stanley Fischer to lower Israel's interest rates against his better judgment. The unlikely alliance has found support in the rank and file of the Knesset, including parliamentarians Shelly Yachimovich (Labor-Meimad), Amnon Cohen (Shas) and Haim Katz (Likud).
"The governor is making a mistake by relating only to inflation," Brosh told TheMarker. "You can't keep inflation at 2% while ignoring (the status of) economic growth and employment." In answer to a question, Brosh added, "I don't believe that Fischer will resign following the legislative proposal. This is a serious person who know that he lives in a democratic country where debate is permissible. I hold him in very high esteem but want him to see three targets equally: inflation, employment and growth. That means he has to lower interest rates by half a percent, to weaken the shekel."
Brosh and Eini's plan is to collect signatures from dozens of Knesset members on a legislative proposal they have prepared, "The New Bank of Israel Law".
The proposal would completely change the central bank's role in Israel's monetary management. If the governor lowers interest rates, albeit against his will, the shekel would immediately weaken, which would buttress Israel's bruised export sector, stimulating economic growth and jobs creation, say the proponents.
Brosh and Eini are starting to collect MKs' signatures today, sharing the job of canvassing the House floor. Brosh will be targeting the Knesset members of Likud, Shas and Kadima, while Eini will handle the ones from Labor and Meretz. Among the Knesset members sure to sign are Avishay Braverman and Shelly Yachimovich of Labor, Amnon Cohen and Haim Katz.
In an extraordinary development, Industry and Trade Minister Eli Yishai is also expected to sign the legislative proposal, in opposition to the positions taken by Prime Minister Ehud Olmert and Finance Minister Roni Bar-On.