Central Banker Eyes Foreign Exchange

Stanley Fischer has the credentials to play a major role in Israel's socioeconomic debate - unless he's more interested in winning a cabinet post.

Over the course of an illustrious international career at the World Bank, the International Monetary Fund and in academia, Prof. Stanley Fischer managed to rub elbows with plenty of influential bigwigs. But his main source of pride and satisfaction in recent years has been his inclusion in the top rank of Israeli officials known as Segel Aleph, which also includes the Israel Defense Forces chief of staff, the police commissioner and the Supreme Court president, among others.

This is the roster of people who occupy the front row at celebrations and memorials. It is also the roster of people who are at the center of decision making, whether on security, social, judicial or economic issues. This is the roster of people in whose hands the fate of Israel is placed for a period of several years. And Israel's fate, while always interesting, is never self-evident.

Fischer is our most American Israeli, and the most Israeli of Americans (although he was actually born in Northern Rhodesia). He has now been with us for seven and a half years as governor of the Bank of Israel. For a moment - a year ago - he came close to leaving, when the possibility arose that he might be appointed managing director of the International Monetary Fund. But that post was ruled out because of his age (69).

It could be that in the international arena, he will never again be offered a job commensurate with his stature. But his thinking is flexible enough to allow him to operate in this arena by other means. His current dream is to serve as the Jewish state's foreign minister.

His success as the foreign minister of Israel's economic policy at several crisis points in recent years may have bolstered his belief that he can contribute not only to the economy, but also to dialogue with neighboring countries and on the world stage. His experience, connections, wisdom and familiarity with the international arena are major assets that enhance the possibility of his being appointed, should whoever heads the next government want a significant and successful foreign minister. But the possibility that Fischer could overshadow the prime minister who appoints him to the post decreases his chances of realizing his dream.

During all his years here, Fischer was very careful to uphold protocol. He rarely attacked the government, as several of his predecessors did. It is hard to know whether this is due to gratitude toward those who appointed him (Ariel Sharon in the first term, Benjamin Netanyahu in the second ), the heaviness of the responsibility on his shoulders, or just personal style.

To be fair, the main reasons for public brawls between the Bank of Israel and the government - and especially the Finance Ministry - are the way the government's fiscal policy is managed and its adherence to budgetary discipline. And during Fischer's years in office, there haven't been large gaps between what Fischer wanted to happen and what actually happened. And when he compares Israel's situation to what is happening overseas, at a time when Western economies are contending with mammoth deficits, surging unemployment and collapsing financial systems, he can't have reason to complain all that much.

No room for doubt

But over the past few months, the situation has been changing: Question marks about the future of Israel's economy have been piling up. The social protest may not have got off the ground this past summer, but the factors that jump-started it in the summer of 2011 have not gone away: housing prices remain high (yes, Fischer's low interest rates are also to blame); the cost of living is rising steadily (partly because of higher prices for oil and other commodities worldwide, but also because of the structure of Israel's economy); the capital market is weak; some of the economy's largest borrowers have collapsed, leaving astronomical debts to both the banks and the general public that invests in the stock market; and the state budget for 2013 is far from being finalized.

It is apparent, however, that this budget will contain additional cruel decrees, since it is clear that meeting the deficit target announced by the government (3 percent of gross domestic product ) will require raising taxes and cutting social services.

Fischer is statesmanlike, but he does not leave room for doubt. On the eve of Rosh Hashanah, he made clear in an interview with TheMarker that if the government cannot present a budget proposal for 2013 by the end of October, as required by law, it must call new elections as soon as possible.

Fischer usually refrains from getting involved in questions of politics, but the elections are not purely a political matter. Rather, they are a cloud that is hanging over the current government's ability to conduct a responsible fiscal policy.

Fischer is waiting for elections, not only here but also in the United States. He believes that whoever is elected president there will have to promptly pass a tough, responsible budget - a necessary condition for finally rescuing America from the financial crisis of 2008, whose aftermath is evident worldwide to this day. The waiting game stems from recognition of the magnitude of the tough economic decisions that leaders of both the United States and Israel, and also Europe as well, have to make.

The obvious options are raising taxes and providing fewer public services, but the question is who will shoulder the burden: whom to take from, whom to give to. That is the type of discussion that is taking place now, and will continue to take place in the coming year or two, and even beyond.

It is a debate in which prominent and esteemed economists like Fischer are taking part, but it isn't confined to them. From the moment the terms "social justice" and "the 99 percent versus the 1 percent" entered the discourse, it ceased to be a purely economic debate and became a sociopolitical debate.

Over the course of his career, Fischer has moved on the axis between academia and the world of business and government, and his milieu is that of central bank governors, economists and financiers. He's accumulated enough mileage to play a role in shaping the face of Israel's economy and society. He is experienced enough, principled enough and courageous enough to lead this one.

What is obvious is that Israel's security and economic situation still demand a full-time economic foreign minister. Thus, even if Fischer's presence in this arena has quietened down a bit lately, he might emerge from his relative hibernation very quickly and start working overtime to calm foreign investors and promote Israel. And in fact, this could happen very soon.