Now it's official: Israel ratifies OECD membership agreement
Israel joins 'rich nations club' amid criticism over currency market interventions.
It's official: Israel is now a member of the Organization for Economic Cooperation and Development. After government ministers ratified the membership agreement earlier in the days, Prime Minister Benjamin Netanyahu and OECD Secretary-General Angel Gurria signed it on Sunday at the weekly cabinet meeting.
While praising Israel's economic performance over the past few years, without specifically naming the central bank, Gurria also had words of criticism for the Bank of Israel and its policy of intervening in the foreign currency market.
Calling it a "currency war," Gurria said that intervention in foreign currency markets is destructive and troubling and that the central bank's needed to be reconsidered.
Gurria noted that the OECD objects to all forms of protectionism in trade and investments.
Currency wars are the hottest topic in financial circles these days, he said, and clearly, countries with current account surpluses will be eyeing the Israeli currency as an investment opportunity.
When a country does not play by the rules, he said, it is profiting at someone else's expense.
Speaking to TheMarker on Monday, Gurria clarified his remarks and emphasized that he was referring generally to intervention in foreign currency markets and not speaking about Israel's practices specifically.
Gurria added that Israel has one of the most sophisticated central banks in the world. He said that Bank of Israel Governor Stanley Fischer is an expert in both the theoretical and practical side of the financial markets, so "of course Fischer knew how far he could go with the intervention in the foreign exchange market," Gurria said.
In May, the OECD invited Israel, Estonia and Slovenia to join the club of free-market democracies. The trio bring to 34 the number of countries the Paris-based organization.
Gurria is one of the few foreign citizens to ever have participated in the weekly cabinet meeting.
"Israel's economy has succeeded because it maintained three basic rules better than other economies: Don't spend money you don't have; make it worthwhile to invest and work; and cut back bureaucracy," said Netanyahu at the meeting. "We're committed to preserve these three rules in the future, too."
Gurria noted that the Israeli economy has been growing rapidly over the past few years, the country's deficits have been shrinking and unemployment is down. In addition, the country has been making remarkable advances in science, research and development and computers, he said.
In a meeting with President Shimon Peres earlier, Gurria noted that Israel's 4% growth, 6% unemployment, shrinking deficit and booming real estate market were impressive. Israel is performing better than most OECD countries, he noted.
Amid the praise, he also noted Israel's weak points. He called on the government to play a more active role in integrating the ultra-Orthodox and the Arabs into the work force.
He also stated that the OECD would support a decision by Israel to raise its take from natural gas profits, a move that the gas exploration companies are fighting.
With reporting by Reuters.