Netanyahu Will Not Support Fischer Against Treasury

Prime Minister Benjamin Netanyahu will not support Stanley Fischer's demands to end Finance Ministry supervision of wages at the Bank of Israel, according to senior officials involved in the negotiations between the ministry and the central bank over the new Bank of Israel Law. Fischer, the Bank of Israel's governor, had demanded that a separate supervisory body determine wage conditions at the central bank, rather than the treasury's wages director, as in the case of all other public-sector employees.

Fischer called a press conference on the matter yesterday morning, at which he said: "The Bank of Israel is trying to create a new law for the bank that will be good for the country and its economy. There does not have to be a war between the bank and the treasury.

"The world understood 30 years ago that such battles are superfluous; they are good for the media and bad for the economy," he said at the press conference in Jerusalem.

Fischer explained that the new law will replace the existing one, which was passed in 1954 - the year the Bank of Israel was founded. The governor also said it was essential to update the law.

Other main features of the proposed new law include turning price stability into the bank's main goal, although it will also try to support the government's economic policies as well as the activities and stability of the financial and public sectors. Two new bodies will be established: a council for setting monetary and interest rate policies; and an advisory council to set the central bank's budget, management practices and wages.

The director general of the Prime Minister's Office, Eyal Gabai, will continue his efforts to bridge the gaps between the two sides this week over the proposed law.

The major disagreement is over who will be the ultimate authority over central bank wages and conditions. Fischer wants the final arbitrator to be the prime minister - not the treasury.

Fischer will end his first term as governor at the end of April 2010. Asked if he intends to serve for a second term, he replied, "We will cross that bridge when we get there, and in any case I will not announce my decision this month or in coming months."