Israelis More Satisfied Than Some Think, Says Stanley Fischer

The Bank of Israel Governor said the bank was preparing for an economic crisis after a possible attack on Iran's nuclear facilities.

Bank of Israel Governor Stanley Fischer says he doesn't necessarily agree that the average Israeli is struggling.

"Surveys that examine the people's level of happiness show that we're among the happier countries," he told Channel 2 Friday evening.

Fischer was not fazed about the state of the housing market, for example.

"It's true that prices are high, but that's what's necessary to [enable] contractors to build," he said. "If we want lower prices, an increase in the construction rate and no tax increases, the money needs to come from either the government - and then the public is actually financing it - or the private sector. And then we'll need to pay more to encourage production."

Fischer said the situation for young couples was not as bad as people thought. "Take into account that the interest they're paying is much lower than what they paid in the past," he said. Still, "If prices continue to rise, then we'll need to take certain steps. I don't know which yet."

On the Iran issue, Fischer said the Bank of Israel was preparing for an economic crisis after a possible attack on Iran's nuclear facilities. He did not give details, but he said the central bank was considering several possible scenarios. He said the bank was preparing for a major crisis and a much worse security environment.

Meanwhile, the government's plans for spending cuts and tax increases were necessary, Fischer said. He praised Prime Minister Benjamin Netanyahu and Finance Minister Yuval Steinitz, saying he was pleasantly surprised with their success in gaining the Knesset's approval. The plan includes spending cuts as well as a value-added-tax increase and income tax increases at higher brackets. VAT goes up on September 1.

Fischer said the government's response to the budget deficit was measured.

"They intend to impose additional taxes, but this will be done responsibly," he said. "Most of the burden will be at relatively higher [income] levels, and much less among low [income] levels and the middle class. It's true that up to now we've been very successful, but the budget has tightened a bit."

Asked whether there was complacency about the economy, Fischer mentioned a March Bank of Israel report.

"I said the state of the economy was good, not excellent," he said. "You need to give credit to the finance minister and prime minister, who are doing what few governments would have done: dealing with the problem they see on the horizon. It's a courageous policy."

Fischer said the economic problems facing the euro zone could snowball quickly, adding that the Bank of Israel is following events there closely, including the possibility that Greece will leave the monetary union.

"We have to say that we don't know what will happen in the euro zone," he said. "If it snowballs, we'll be in big trouble. In such a case there will be a financial crisis like 2008 and it will cause us serious problems."

Fischer was also asked about his future plans and rumors that he will resign soon. "I myself don't know what I'm doing here sometimes," he said. But he has no political aspirations, he added.