Analysis / The Treasury Is Not Giving Up

The excessive salary conditions at the Bank of Israel have been starring in the headlines for quite some time - and the affair is showing no signs of disappearing any time soon.

The scandal will not come to an end until a decision is made once and for all that the former senior management at the central bank, who received huge sums of money without any legal basis, must repay this money. And, no less important: The bank must apply the new salary conditions agreed to with the Finance Ministry to its senior officials today, too.

The step taken yesterday by the treasury's wages director, Eli Cohen, was extremely simple: He reminded the Bank of Israel, and the public, that the issue is still alive and kicking. Cohen made it clear that even if he is leaving his post at the beginning of August, the treasury will do everything in its power to make sure justice is done. That is why he demanded yesterday to receive full details of all the monies paid to senior bank officials in recent years, as a prior step in preparation for the hearings.

The wage dispute between the Bank of Israel and the Finance Ministry is now in its final stage - but this stage has been going on for almost a year, and it will come as no shock to anyone if it lasts another year.

A new wage agreement was signed in December 2007, but a number of disputes still need to be settled. The issue has simply been transferred to Jerusalem Labor Court Judge Eyal Avrahami, who for now is taking his time. Among other things, Avrahami is supposed to decide on the date from which the unlawfully paid wages have to be returned. Cohen demanded that all money improperly paid from 1985 onward be repaid, but even he knows that no one will accept this. In reality, Avrahami has to decide between the treasury's demand for repayment from 1998, and Governor Stanley Fischer's 2004 date. The more recent date would cut the amounts to be paid back to only a few tens of thousands of shekels per employee, and only in a few rare cases would the amount exceed NIS 100,000.

The issue affects every single member of the bank's incumbent senior management.

It seemed as though relations between the treasury and central bank had improved of late. Cohen's invitations to the hearings were a shock. Fischer, who learned about the letters while he was on an overseas trip, was furious. The chance that the new Bank of Israel Law, his baby, will be enacted any time soon is once more highly unlikely.

The real question at the center of the dispute between the two sides over the new law is the wages at the bank - or actually, who makes the final decision on wages when the two sides disagree. The treasury insists the power belongs to the government's wages director, naturally, while the bank of course believes it is part of its prerogative.