Stanley Fischer's tenure as governor of the Bank of Israel has been successful due to Fischer's professionalism and excellence - though his high profile hasn't hurt either, former central bank governor Jacob Frenkel told Channel 2 over the weekend.
Frenkel's comments follow Fischer's announcement last week that he is stepping down as central bank chief at the end of June. "When Fischer was around the world, people listened, which raised Israel's capital," Frenkel said, before adding another metaphor: In addition to being a good governor, Fischer was an excellent foreign minister.
"The Israeli economy looks extraordinary around the world, not only because it is successful, but also because it has been successful during a period in which the world has undergone huge [economic] turmoil, when it was the small Israeli economy that weathered the crisis in a most impressive way," said Frenkel, who served as Bank of Israel governor from 1991 to 2000. Fischer took on the job in 2005 after a career that included the chief economist's post at the World Bank.
"The Israeli economy's performance is the result of a long-term process, immigration from the former Soviet Union, major reforms in the 1990s and in 2003, the taming of inflation and the strengthening of the banking system," Frenkel said.
Regarding long-term strategy, a small country like Israel with few natural resources needs to exude excellence and efficiency if it is to succeed, "and the results show this, even if sometimes there are difficult, problematic periods."
Frenkel added that Prime Minister Benjamin Netanyahu has backed his finance ministers, and his support for Finance Minister Yuval Steinitz has been a major factor in Israel's ability to weather the recent global crisis.
"When Fischer and his wife immigrated to Israel, they took the [ultimate] Zionist step. We don't have to discuss the fact that he is stepping down two years early," Frenkel said, a reference to Fischer's departure before the end of his term.
Frenkel added that the large budget deficit the government will have to deal with this year must be reduced to "reasonable proportions." Ultimately, one reason the Israeli economy has been so successful in recent years has been "a very responsible handling of the budget," a policy of reform and financial stability.
The deficit could be reduced through faster economic growth, which in turn would increase tax receipts. "Faster financial growth requires the carrying out of reforms and financial stability, among other things," he said.
"If there is no alternative, taxes can be imposed, but that has to be done reasonably and in a measured way, because ultimately the producer and the consumer must receive incentives, so [they] won't think that the more successful they are, the more someone is taking from them."
Frenkel, who has served as chairman of JPMorgan Chase International, has said in the past that he was offered the job of finance minister. He is not interested in the post, which must be filled by an expert in the field, he said.
"When they appoint a Bank of Israel governor, professional considerations are the most important," he said. "But when they appoint a minister, they need to take political compromises and management abilities into consideration too. Being a minister is an altogether different profession."
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