Analysis / International Gloss on Israel

Central bank governor Stanley Fischer gave his annual speech on behalf of the State of Israel Monday afternoon before the International Monetary Fund in Washington.

WASHINGTON - Central bank governor Stanley Fischer gave his annual speech on behalf of the State of Israel yesterday afternoon before the International Monetary Fund (IMF) in Washington.

Fischer's speech was very different than any given in recent years by the various representatives of Israel at the conference. Fischer dedicated only a small portion of his speech to Israel's economy, focusing instead on an analysis of the problematic state of two international bodies: the International Monetary Fund and the World Bank. Okay, true, that's where he came from.

On the Israeli economy he heaped praise. He mentioned its fast growth rate of 5 percent, the inflation which is under control, the budget nearly devoid of deficit, and the substantial excess in the balance of payments - 4 to 5 percent of the gross national product.

Fischer emphasized what everyone loves to hear at the IMF and the World Bank: Capital flows are unhindered in Israel, and that the exchange rate fluctuates unhampered by intervention of the central bank.

He even added that budgetary discipline and growth rates have decreased the government's part in the national product from 52 percent in 2003 to 44 percent this year, but that "more must be done about poverty."

To top it off, Fischer added a small political point: Economic problems will be more easily solved when the chances of peace with our neighbors are greater.

And then Fischer went on to the central part of his speech, the state of the IMF. He spoke of the central role that the fund plays in "handling humanitarian problems in the world," in advising and execution of conclusions, with the help of member nations in the fund.

A decade ago, he said, we were sure that there would be no more financial crises in developed countries, and the recent credit crisis has proven us wrong. There is much to learn from this crisis, corrections to be made, "and we wish the incoming managing director, Dominique Strauss-Kahn, the best of luck."

Fischer then went on to speak of the six goals of the new president of the World Bank, Robert Zoellick, and wished him success in bringing the fruits of world economic growth to nations that have yet to benefit from such growth: in other words, developing countries.

The most interesting discussion at the summit took place between two world-renown economists, the former chairman of the federal reserve Alan Greenspan and Fischer.

Greenspan said that the biggest risk in the current credit crisis is that it could lead to proposals of defensive policy. In other words, to a reduction of commerce and more hampered flow of capital. And this would harm mainly the economies of developing countries.

The bulk of his speech was dedicated to the defense of the policy that he himself oversaw during his years as chairman of the Federal Reserve in 1987-2006.

The purpose of Roni Bar-On's first official visit to the U.S. as Finance Minister, which happened to fall on the 20th anniversary of the market crash of 'Black Monday,' was to try and raise Israel's credit rating.

To this end he met in New York with senior management of the international credit rating agency Fitch (which hasn't raised Israel's rating since 1995), and with Modis and Standard and Poor in Washington.

Bar-On repeated his central message to everyone he met: fiscal discipline. He informed them that Israel maintains fiscal discipline, there are no budget deviations, and the deficit is minimal. Exactly what credit rating companies love to hear. More than anything else, these indicate economic stability, and Bar-On understands this perfectly.

In Washington, the minister has one more goal: to lobby for Israel's formal acceptance into the Organization for Economic Cooperation and Development. There he met with the organization's Secretary General Angel Gurria, seeking to expedite the time table for acceptance in to the group of the most-developed nations in the world. There has been a delay, it seems.

Some problem between Poland and Russia (which is also a candidate). And what, you may ask, does this have to do with us? Well, the vote of acceptance for all five candidates will be conducted at the same time.

Gurria said Israel will be accepted in any event; Fischer anticipated the blessed event in 2008 or early 2009, rating our chances at 80 percent. Remember, it is also a political issue, and connected to our relations with the Palestinians.