Questions for Stanley Fischer

The governor of the Bank of Israel, Stanley Fischer, was asked during an interview he gave to Channel 2 television whether he meant to stay in Israel when his term ends.

Fischer, offering his modest smile, answered with that tired chestnut that economists say it's dangerous to make forecasts, especially about the future.

His elegant answer was yet another example of how he dodges inconvenient questions. He had good reason to leave this one up in the air. The question of how committed Fischer is to Israel has come back to the fore lately, as the treasury and Bank of Israel union wrestled over a wage agreement for the bank workers.

The question arose again this week, in a last-ditch effort to wrap up the negotiations. Sources involved in the negotiations claim that so did the threat that Fischer would quit and leave Israel if the talks didn't end the way he wanted them to. Feeling that it was bad enough to have the Tax Authority collapse, they didn't need a breakdown at the Bank of Israel, the officials thought compromise was the wiser choice.

Based on Fischer's lofty standing in the international community and the tremendous contribution that he no doubt lends to Israel's economic standing, the prime minister and finance minister would be all the more willing to compromise.

That is probably the main reason why the bureaus of the prime minister and finance minister elected to wrap up the talks with Fischer behind the back of Eli Cohen, who's the wages director at the Finance Ministry, and to accept terms that Cohen says are illegal. Yet if anybody's empowered to conduct the negotiation and sign the agreement, it's Cohen.

Fischer firmly denies any threats to pack up and go, but there's no doubt that the question of his commitment to Israel floats over every negotiation with the central bank over wage practices. From that perspective, Fischer, so clever  and Anglo-Saxon, has proved his mettle as a doughty union leader even more daring and militant than Ofer Eini, chairman of the Histadrut labor federation. At most Eini can threaten to shut down the country. Fischer can threaten to harm Israel's international standing.

With clout like that behind them, no wonder the Bank of Israel can boast a triumph in its labor negotiation. The existing workers did take a 25% pay cut, and some illegal extras to their pay were canceled. But most of the pay perks that the central bank tailored for its people over the years remain, and have been laundered into the new agreement, too.

For instance, they are entitled to a high level of car maintenance reimbursement, and pay of NIS 42,000 a month at high echelons, which is more than almost any other government body pays.

Tough choices

Eli Cohen, the wages director at the Finance Ministry, insisted on abolishing the practice of paying car maintenance to people who have no driving licenses, let alone cars. He almost got away with it, but the talks broke down two weeks ago after it turned out that the central bank insisted on preserving that perk for new workers as well ("second generation").

An extra NIS 500 a month for each and every central bank worker, irrespective of their actual travel expenses, was the demand Fischer raised, and when Cohen said it was illegal, since it's just a pay raise called by another name, Cohen found himself with a wage agreement sewn up behind his back.

Cohen has already stated that he won't sign the agreement. But if the government's choice is between Cohen going home, or Fischer going home, wherever he calls home - well, Cohen must know who the government would choose.

Fischer may therefore shortly be posting an extraordinary Israeli achievement: there?s a good chance that he'll shortly be hanging Cohen's scalp from his belt.

But Fischer should also think about the achievements he's supposed to reach in his capacity as economic adviser to the government. For instance, what should he advise the government as it negotiates with teachers? Should he recommend that each teacher get NIS 500 more a month, for car costs, whether or not they drive? Perhaps all school principals should be paid NIS 42,000 a month, because a principal is surely no less important than a manager at the Bank of Israel?

Perhaps Fischer can discourse on the economic ramifications of setting public-sector wages based on the norms at the Bank of Israel? What would our budget deficit, costs to GDP, or economic growth look like, if the central bank norms become the yardstick?

One has to wonder whether Fischer, in his capacity as economic adviser to the government, thinks that laundering a pay hike into costs is good advice. If he doesn't think so, then why did he throw all his weight into assuring that very thing for his own workers?

Oh, and by the way. One wonders what Fischer thinks about the practice that's taken root at the bureaus of the prime minister and finance minister, to usurp the legal powers of the staff at the Finance Ministry. It began as a means to gag the accountant-general, Yaron Zelekha, and has turned into a system for running government in Israel, even if the law, proper administration, and appearances would dictate otherwise.