Fischer Wants Israel's 2013 Budget Passed by October

BoI governor to TheMarker: 'I'm more optimistic than six months ago.'

Bank of Israel Governor Stanley Fischer does not share the gloom that has swept over the Israeli economy in recent months, but he says that if the government does not pass the 2013 budget by next month, the country should go to elections to remove the uncertainty.

"Our situation is similar to what it has been for the past year," he said. "Our situation is good, but not excellent. It's a lot better than in most countries of the West."

Fischer told TheMarker he sees maintaining the country's security as a supreme task, despite public demands for greater social justice. He noted that Israel's security situation had worsened over the past year.

He said the stability of Israel's banking system was even more important than competition among the banks, but that he was not insensitive to the needs of the individual consumer.

As the government's chief economic adviser, Fischer's job includes warning about financial dangers. But his perspective is different due to his views on events elsewhere around the world.

Fischer likes Israel's general position, including the stability of its banks and its jobless rate compared to what is happening in Europe. Still, he acknowledges that unpleasant surprises could come our way at any time and from any direction. During the interview, which took place Friday at the Bank of Israel in Tel Aviv, the Central Bureau of Statistics announced a 1% jump in the consumer price index for August.

TheMarker also asked for his thoughts about the many debt restructuring agreements with some of Israel's wealthiest citizens. Bondholders are often repaid much less than the full amount owed.

"We have looked into the matter in depth, and it seems to us that although the phenomenon is certainly undesirable ... there is no danger here to the financial system at this stage," he said. "We don't think it will become a big problem."

Regarding housing costs, Fischer noted that it takes two years to build an apartment in Israel, so any effort to increase supply will take time.

"I would have preferred a sharper increase in construction starts, but we have to make sure there isn't oversupply," he said. "I would like prices to drop relatively slowly. If I were a [building] contractor, I would think it important to think ahead. I hope that if we have scared the contractors, it wasn't in an exaggerated [way]."

Fischer concluded the Rosh Hashanah interview on a positive note. "I'm more optimistic than six months ago," he said.

Stanley Fischer
Moti Milrod