Medina Favorite for Bank of Israel Post

The chances of United Mizrahi Bank CEO Victor Medina becoming central bank governor in January 2005 have increased now that Prime Minister Ariel Sharon has dropped his objections.

The incumbent Bank of Israel governor, David Klein, apparently will not be offered a second term when his current one ends in a year. Klein and his consistently tight monetary policy have few supporters in the treasury or the prime minister's office. Medina, however, is widely popular in many government circles and among those supporting him for the job is Finance Minister Benjamin Netanyahu.

The law on the central bank stipulates that the governor is appointed "by the President of the State, as recommended by the government.| In practice this meant the prime minister chose the governor after consulting his finance minister. Under an agreement between Netanyahu and Sharon on the formulation of the current government, the two decided they would submit a candidate together for the next governorship of the central bank.

Medina is considered a close colleague of the finance minister and is often seen in treasury corridors. Netanyahu recently appointed Medina to the newly established monetary advisory council, which advises the governor - but has no authority or real power - on setting the interest rate. Medina is a fierce opponent of Klein's policies and, in effect, the council was set up to voice these concerns in opposition to Klein's strict monetarism.

Many in the top circles of the central bank also want Medina as governor, according to reports that reach Netanyahu's ears. However, Sharon objected to Medina as the candidate because of a long-standing dispute.

It goes back 17 years to when Medina was director general of the treasury and Sharon was a minister who overspent his budget and Medina tried to rein in his spending.

But recently, say sources close to the prime minister, Sharon's opposition to Medina had been fading and his support for Medina is now greater than for any other candidate - based not least on Medina's experience. Medina served 20 years in several senior positions in the central bank, ending as head of the monetary department.