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"I haven't thought about it," Bank of Israel governor David Klein told us in a special interview with Haaretz, summing up 2003.

It was the first time Klein had been explicitly asked to comment on the hottest topic in Jerusalem's economic circles today - whether he wants another five-year term on the job.

A year before his contract expires, at age 68, some 10 years younger than Alan Greenspan, Klein isn't bothered about another term. In contrast to his predecessor, Jacob Frenkel, it's hard to imagine Klein aspiring to a top job at Merrill Lynch, or at Bank Hapoalim (TASE: POLI).

Even if he really isn't thinking about it, we think he should. In the present political constellation, extending his tenure would raise questions about the independence of Israel's central bank in the year to come.

The person who appoints the central bank governor is the prime minister. But Ariel Sharon and Benjamin Netanyahu have an agreement, under which economic issues, especially pertaining to the central bank, are Netanyahu's purview. His word is the word. Ergo, the man who may effectively appoint the next governor is the finance minister.

Could that be influencing Klein today? Could the praise he's been heaping on the finance minister lately be connected?

Klein is not known for bowing and scraping before politicians, nor is he a known aficionado of superlatives. If you've tracked his career for the last 15 years, you know he has understated, if anything, and has persistently seen the central bank's role as including critiquing, warning, thinking for the long-term, not dispensing compliments. There are enough cheerleaders and sycophants around.

Yet, in recent months, Klein's been sounding a new tune - not only contentwise, but in style, too. His notorious cynicism has evaporated; his recurring warnings about the gap between economic talk and economic deeds have disappeared. Instead, he hasn't missed an opportunity to laud Netanyahu.

Unarguably, Klein, like most economic players in Israel, not only feels that Netanyahu is a 180-degree change from his predecessor, Silvan Shalom, but is also one of the best finance ministers Israel has ever had. Klein is impressed by Netanyahu's budget cuts, reforms and sheer leadership.

But the central bank's role is to criticize, to warn, and, mainly, to highlight the issues that the finance minister, a politician, prefers by nature to ignore. For instance, Klein should be noting that the key causes of the economic upswing in the last year were external - the global economy, the U.S. guarantees, the war with Iraq. And that has important operative ramifications - what has been achieved through the budget is just the beginning. One cannot rest on one's laurels, not for a second.

Klein dismisses our fears as baseless. "If I allow inflation to lift its head, it would prove I lost my independence. But as long as I adhere to price stability, clearly the Bank of Israel remains as independent as before," he says.

Not accurate - fulfilling the goal of keeping prices stable is a key gauge of the central bank's independence, but it isn't the only one. The bank plays an important role in providing economic advice, and in critiquing the government's economic actions.

There may be no fear of an inflationary outbreak at the moment; the U.S. guarantees are providing a strong safety net and Israel's economy could recover further in 2004; but the central bank still faces major challenges - to remain on guard, to ensure that the hiatus given us by the guarantees is utilized to carry out a genuine plan to rehabilitate the economy that would serve as a healthier foundation for growth, competition, and job creation.

Surprises and bitter fights could also be lurking as far as inflation and interest rates are concerned, and Klein comes to the front weakened by the negative inflation of 2003. The real threat to the central bank's independence isn't any putative changes to the Bank of Israel Law, or from the combative chairman of the advisory panel, Aharon Fogel. The real threat to the central bank's independence lies deep with Klein's own head. Will he remain faithful to the principles that guided him through the last 15 years? Or will be become more flexible as the twilight of his central bank career approaches?