22 Months Ahead of Time

Stanley Fischer to Step Down Early From Bank of Israel

Noted economist has served as central bank governor for eight years; will exit on June 30; decision is said to be personal, not political.

Stanley Fischer, the governor of the Bank of Israel, will be stepping down at the end of June, he announced Tuesday. His exit is 22 months shy of the end of his contract.

Fischer, a highly-respected economist who has served the post for eight years, said he had informed Prime Minister Benjamin Netanyahu of his intentions on Monday.

He did not explain his reasons for quitting early, but it appears the decision was personal – to be closer to his family who live in the United States.

Among the leading top candidates to take over from Fischer are Avi Ben-Bassat, whose career includes working as a senior official at the Bank of Israel and a director-general at the Finance Ministry, and Manuel Trajtenberg, who served as the first chairman of the prime minister's National Economic Council and headed the committee that proposed a set of social and economic reforms after the social-justice protests of 2011.

Trajtenberg is currently chairman of the Planning and Budgeting Committee of the Council for Higher Education in Israel.

In a press statement, Fischer said that one of the primary goals he had set himself was passing a new Bank of Israel law. "That was done in May 2010. Since then, the Bank has operated successfully within the framework of the new law, especially through the work with the Monetary Committee and the Supervisory Council," the statement said.

Fischer will "continue to deal fully with all matters pertaining to the bank" over the next months, the central bank said.

After his meeting with Fischer on Tuesday afternoon, Netanyahu said: "Stanley Fischer played a major role in the economic growth of the State of Israel and in the achievements of the Israeli economy. His experience, his wisdom and his international connections opened a door to the economies of the world and assisted the Israeli economy in reaching many achievements, during a period of global economic crisis. I thank Stanley Fischer. I had the privilege of working with him both as Finance Minister, when he was appointed to the position, and as Prime Minister over the past four years. I am certain that he will continue to contribute to the State of Israel," Netanyahu said.

News of Fischer's sudden resignation sent Israeli stocks down from a mild negative bias to a firm drop of 1% on Tuesday. Israeli government bonds reacted more strongly, falling as much as 1%, which is a lot for government bonds.

Acknowledged far and wide

Fischer presided over a challenging period, most particularly the global financial crisis that set in in 2008, during which he played a key role in shielding the Israeli economy from its devastating impact. Fischer has been lauded throughout the globe for his work, and was rated among the top six central bankers last year by the magazine Global Finance and best central bank of 2010 by Euromoney. He was also instrumental in promoting Israel’s successful bid for acceptance into the Organization for Economic Cooperation and Development,

In June 2011, Fischer applied for the post of International Monetary Fund managing director to replace Dominique Strauss-Kahn, but was barred from competing for the role because of his age.

Fischer, 69, was born in North Rhodesia, now Zambia, and educated at the London School of Economics and Massachusetts Institute of Technology. He has a Ph.D. in economics from MIT, where he also served on the faculty as a professor.

Before joining the Bank of Israel as governor in May 2005, Fischer was vice chairman of Citigroup and also served as the first deputy managing director of the IMF from 1994 to 2001. At the IMF, he worked on resolving financial crises in Mexico, Russia, and Southeast Asia during the 1990s. Before that he was vice president for development economics and chief economist at the World Bank.

He became an Israeli citizen upon taking up the post as governor.

Fischer was the thesis adviser of Federal Reserve Chairman Ben Bernanke and a former teacher of European Central Bank Governor Mario Draghi.

The responsible adult

Fischer said he was "extremely grateful for the opportunity he has been granted by the government of Israel to fulfill the task of Governor, especially during a challenging period that included the global economic crisis, a complex geo-political reality, and domestic social issues."

The announcement of Fischer's leaving will raise the risk premium of the Israeli economy, said Elah Alkalay, the vice president of business development at the IBI investment house. His resignation is "particularly problematic in this period of a lack of clear economic leadership, personnel shakeups in the treasury staff, a coalition under formation and the fact that there is not even a leading candidate for Finance Minister," she added. But the announcement said Fischer will stay on until the end of June, and by then the economic leadership should stabilize, she said.

"The economic foreign minister of the State of Israel is leaving and whoever takes the position will have extremely large shoes to fill," said Yaniv Pagot, the chief strategist of the Ayalon group. The bottom line is that this is bad economic news for Israeli markets at the beginning of 2013, and in response the stock market fell unsurprisingly, said Pagot.

Fischer was an excellent governor, said Amir Kahanovich of Clal Finance. "In addition to the professional monetary management, his influence was great also in the fiscal area where he advised the government. Fischer was always the responsible adult, ignored the politics surrounding him and was careful to work professionally and responsibly," said Kahanovich. He also dealt with the budget and budget deficit, and there is no doubt that foreign investors also had faith in him and his policies, he added.

Finance Minister Yuval Steinitz thanked Fischer for his years of contribution  to the Israeli economy, including during the period of the global financial crisis. "Fischer became an asset not only to the Israeli economy but also to Israel's international image, in credit to his stature and internationals connections," said Steinitz.

Emil Salman