Full Speed Ahead

Netanyahu, Lapid to Choose Bank of Israel Chief This Week

More than three months after Stanley Fischer stepped down, choice remains up in the air.

Finance Minister Yair Lapid returned from the annual conclave of the International Monetary Fund in Washington on Sunday, while a week and a half ago Prime Minister Benjamin Netanyahu flew in from New York after addressing the United Nations General Assembly. That means for the first time since the High Holy Days, the two are in Israel at the same time, which means in turn that sometime in the coming days they are expected to sit down in the Prime Minister's Office for a final meeting over who will be the next governor of the Bank of Israel. It's anyone's guess who that person will be.

The prime minister is supposed to choose the governor in consultation with the finance minister, with their nomination then given to the cabinet for approval.

Exactly 106 days have passed since Stanley Fischer left office, with Karnit Flug, his deputy, filling in. All indications are that when Fischer' s successor is formally announced, she will step down and leave the Bank of Israel.

The long lag time between governors is not entirely unprecedented. David Klein, the bank's seventh governor, formally ended his term at the end of December 2004. For the next 122 days, until May 1 the next year, Meir Sokoler, the deputy governor, filled in until Fischer could wind up his affairs and come to Israel. The difference, though, was that while Sokoler was filling in, the identity of the new governor was known.

Which names are under consideration for the next governor? Lapid and Netanyahu themselves have not been forthcoming about who their preferred candidate is. All the scuttlebutt emerging from the PMO in recent weeks indicates that Netanyahu is not excited about any of the top three candidates. If he had his druthers he would still go for his first nominee, Jacob Frenkel. Some say the prime minister is still searching for another candidate who comes closer to meeting his requirements – either from Israel or overseas – but to date no one has emerged.

Formally speaking, three candidates remain in contention – Mario Blejer, Zvi Eckstein and Victor Medina. In addition, other names have been suggested to Netanyahu in the last few weeks, some of them Israelis and some American Jews. The list isn't short.

Among them is Oded Sarig, who only recently stepped down as commissioner of the capital markets, insurance and long-term savings at the Finance Ministry. Sarig, whose name was suggested by a senior minister, taught at the University of Pennsylvania's Wharton School and has sat on the boards of the Tel Aviv Stock Exchange and Bank Hapoalim.

On the eve of the decision on the next governor, another interesting question has emerged - why did Fischer reiterate his support of Flug for the job, and not of Eckstein? Both have served as deputy governors during his term.

Sources: It’s between Blejer and Eckstein

Sources close to Netanyahu and Lapid believe the real competition is between Blejer and Eckstein. To this day the prime minister has not explained why he rejected Flug and any number of other appropriate candidates for governor.

Medina, 74, was a candidate back in 2005 but Netanyahu, then finance minister, opted for Fischer, with the backing of Prime Minister Ariel Sharon. Today Medina has the backing of Uri Yogev, who was then head of the Government Companies Authority, and Aharon Fogel, a former treasury budget division chief, both of them very close to Netanyahu.

But rumors have it that Lapid has vetoed Medina's candidacy on the grounds that he is "out of date."

Meanwhile, the race between Blejer and Eckstein is neck and neck. What no one knows is exactly what factors are going into Netanyahu and Lapid's considerations. One thing certain is that they are not strictly economic. Netanyahu is taking into account – and this may be his central consideration – that if Eckstein is chosen, the media will portray it as a Lapid victory. Worse still, it will come amid reminders that the prime minister's two previous candidates had both dropped out. Netanyahu and Lapid can both deny that version of events, but ego would probably take precedence over tact for both politicians.

Blejer, 65, was deputy governor of Argentina's central bank, and for a brief six months in 2002, its governor. He is a well-known, respected international economist and has connections with Israel's economic establishment as well. He received his bachelor’s and master’s degrees from Hebrew University, then did his doctorate from the University of Chicago in 1975. At the end of the 1980s, he taught at Hebrew University. He spent 21 years at the IMF and World Bank in senior positions and most recently served as an adviser to the Bank of England.

Eckstein, 64, was deputy Bank of Israel governor until he stepped down two years ago after five years in the post. He received his first two degrees from Tel Aviv University and his doctorate from the University of Minnesota. He was a professor of economics at Tel Aviv University. After he stepped down from his position at the central bank he became dean of the business school at the Interdisciplinary Center of Herzliya. When Lapid became finance minister he was among the economists who advised him.

Former Finance Minister Yair Lapid and Prime Minister Benjamin Netanyahu.
Oren Nachshon