“Repairs at the Bank of Israel could wait no longer. Elevators were about to collapse, plunging down with people inside," explained Hezi Kalo, Director General of the Bank of Israel.

Heavens to Betsy. Nobody wants people to plunge to bloody death in a metal cage. It is a shattering way to explain why the central bank feels it needs to spend NIS 177 million on renovations, though in fact fixing or simply replacing an elevator would be rather cheaper.

At this very time, the central bank published a grave report listing the fiscal fiasco of Prime Minister Benjamin Netanyahu and his Finance Minister Yuval Steinitz. This document stresses the imperative to slash at the spending, including by savaging salaries and benefits in the public sector, reducing defense spending and infrastructure investment and in fact cutting back everywhere and everything. How does this square with the concurrent undertaking of a major grandiose renovation at the central bank? Is this how to set a personal example?

The need to repair the Bank of Israel building is not new. It's been on the bank’s agenda since 2008. Governor Stanley Fischer and Kalo supported the project, which was initially slated to cost a modest NIS 70 million. But as time wore on the vision developed, inflating the renovation estimate to NIS 130 million. There was even a costlier proposal for NIS 250 million, which involved moving all 800 employees of the central bank to an alternate location for three to four years, the expected duration of the renovations. That would certainly have done nothing good for the bank's functioning.

Interestingly, the need for a massive makeover never arose during the tenure of the previous governor, David Klein, who would have rejected the proposal out of hand anyway. Modest repairs would have started in 2009 but the central bank was worried about the public backlash, including in this newspaper.

No question about it, some renovations are warranted at the Bank of Israel. Its air conditioning and fire extinguishing systems need repair, as do its elevators and safety features. Installing a sprinkler system and fireproof doors, as well as strengthening parts of the structure, is essential. However, this is a far cry from the planned grandiose NIS 177 million project.

It remains to be seen what the final costs will actually come to. Clearly the cost will exceed the approved budget, including one item stemming from the moving of all employees to a different location for at least 3 years. A ‘small’ additional item in the renovation budget covers compensation for employees, for agreeing to move to temporary quarters.

I would propose that Kalo visit the editorial offices of Haaretz to see how modest renovations can be accomplished while staying on the job, without moving out. But private corporations that depend on revenues and must keep costs down can't afford to squander money. In contrast, the Bank of Israel sets its own budget, with no restrictions. This leads to “essential projects” which are not necessarily required.

That NIS 177 million budget includes caring for employee comforts. This will entail restructuring of public spaces, conference rooms, hallways, bathrooms, a library and a restaurant, as well as inner and external open spaces. According to Kalo, “we are not talking of luxury, only of essential changes”. That remains to be seen.

In any case, somebody has to intervene and make this project stop.

It is wrong for the Bank of Israel's management approve such spending without external public oversight. The State Comptroller and the Budget Division at the Finance Ministry must take part and responsibility for these decisions. It is wrong to call on the public to tighten its belt because of the tough times while the central bank goes on a spending spree.

Search your soul, Jerusalem
Meanwhile, the Bank of Israel put out its usual budget summary for the year that was, called "execution of the 2012 state budget" (which ministries underspent their budgets, which overspent and so on). The document confirms what I have been writing here for the last two years.

The Bank of Israel notes that the government deficit exceeded its target in 2012, and says that current planned expenditure for 2013 is NIS 13 billion higher than budgeted. Without sharp reductions in expenses and tax hikes (or elimination of tax breaks), says the paper, the ratio between the national debt to GDP will not drop as it should. If that ratio remains unchanged, or heaven forbid increases, it poses a real danger to Israel's economic stability.

But the central bank is wrong in its analysis of the government's fiscal failures, since it had a part in the mismanagement.

The Bank of Israel report ignores new rules that enabled spending to shoot skyward, while filing to make contingency plans for unexpected crises or a political inability to raise taxes. Governor Fischer himself and his deputy Karnit Flug supported these ill-guided measures, which is probably why the report ignores them.

The report also ignores the fact that the Bank of Israel stood behind the groundless revenue estimates for 2012 that were presented by the Finance Ministry's budget division. These erroneous estimates were a large part of the reason why the budget became so unbalanced.

Nor does the central bank report mention that the heads of the bank did not criticize the excessive expenses in real time, namely in 2011 and early 2012. If they did so, their weak voices were shut out by the partying government. Shutting the barn doors after the horses escape is of little use. The central bank should write a new report, that includes some honest soul searching.