Blue Bloods in Civil Service

While the Israeli economy was shut down, and all eyes were on the municipal workers' fight to receive their measly, unpaid salaries, a completely different battle was being waged in the Bank of Israel. This was a fight over the cherry on top of the whipped cream on top of the cake groaning with richness to begin with.

The management of the Bank of Israel, led by the governor himself, Stanley Fischer, insists on dictating its own salary norms, which are completely unacceptable, and have no parallel in the civil service.

Normally civil service wages are under the command of  Finance Ministry, but the BoI insists on its independence in that too.
The argument is over an agreement known as a "second generation wage agreement" for the senior officials of the bank. This would include the bank's director general, deputy governor, supervisor of banks, senior management and senior economists.

Fischer is adamant. He wants BoI workers to earn more than the prime minister, the treasury's director general, the head of the Israel Securities Authority or even the CEO of the Israel Electric Corporation.

Why? Is their blood bluer than that of any other government official?

This is where things stood when the negotiations blew up last Wednesday - and thank goodness they did.

Why? Because if the treasury would have caved in and accepted Fischer's demands, the attorney general would not have accepted the agreements. This would not be a clean, fair ad new "second generation agreement" at all, which is what the attorney general rightly wants.

The treasury's wages director, Eli Cohen, cannot give in this time. He has already given in once too many times in the past.

Cohen has already agreed that the maximum retirement grant given to retiring bank workers will be NIS 1.6 million each - and that is far too much.

He also agreed that those who retire from the central bank in the next few months will each advance 1.75 additional rungs on the salary scale for pension and benefit purposes. This gift will decrease to "only" 1.5 ranks over the next seven years - and even this is outrageous.

And of course we should not forget that the huge problem of paying back the excess retirement benefits already paid out to bank pensioners is nowhere near being solved.

But Ehud Olmert is pressuring Finance Minister Abraham Hirchson to give in, to close a deal and to just get rid of the problem already - because Olmert does not think that ethics or public funds are important. What is important to him is that Fischer stays on as governor.

A senior official in the Bank of Israel says that, in practice, the central bank has not been managed for years. They closed down entire departments, but didn't fire any of the workers - such as in the foreign currency or state loans departments. There are no standards for measuring efficiency or output in the bank; and the work of one department has no connection to that of another.

"We are 1,000 years behind the rest of the world in managing the bank," said the official. "It is impossible to change the management culture to a business culture without signing a work agreement."

The senior official is right. It is time to sign an agreement. It is time to carry out a management revolution in the Bank of Israel.

But it is necessary to sign a legal and ethical agreement that will withstand public scrutiny - and that is a lot harder.

The manufacturers rebel

A small, but very important little article appeared this week in the paper. The Manufacturers Association and the transport council finally rebelled. They advised the Ashdod port that they wouldn't lose any more workdays or export contracts - and were therefore giving their business to the port in Haifa.

The result did not take long in coming: The Ashdod port workers stopped their strike and went back to work.

Another result was that David Peretz, the head of the port workers union in Haifa, told the manufacturers and transporters that they would be welcomed in Haifa with fast and efficient service - if only they would come.

This is an excellent example of the power of competition - even if it is limited.

It is true that the port workers received very high compensation for agreeing to the division of the Ports Authority into four separate, and independent, ports. But the payment will be worth every cent if the competition between the different ports grows and opens one of the Israeli economy's worst bottlenecks.