New Central Bank Governor Says Growth Could Reach 5-6%

The freshly sworn-in eighth governor of the Bank of Israel, Stanley Fischer, believes that growth could reach an annual rate of 5-6 percent if the country exercises its full potential. With such growth, Israel could achieve the GDP per capita levels of second-tier, not top-tier, European countries, he says.

The new governor fully supports the Bachar capital market reforms, which include banning the banks from owning provident and mutual funds. Fischer is expected to meet with bank leaders next week to hear their point of view. Banking heads are known to be against the reforms, which would remove their institutions from a financial market which they currently dominate. As a result, they may be hoping that Fischer will side with his alma mater, the International Monetary Fund, which warned that the recommendations are too far-reaching. Despite having served as first deputy managing director of the fund, Fischer is likely to disagree with the IMF in this case.

Fischer says the central bank should add economic growth support to its list of goals, while not making it a higher priority than maintaining price and financial market stability.

The governor believes the way to resolve the blight of poverty is via spurring economic growth, a statement highly reminiscent of Finance Minister Benjamin Netanyahu's policies that without economic growth, there will be no solution for the poor.

Fischer also believes Israel's welfare system begs reform, hoping that Israel will choose something in between the stringencies of the American system and the expansion of the European system, which helps spur high unemployment rates. However, he firmly opposes abolishing the shekel and adopting a bloc currency such as the dollar or euro.

Israel theoretically could join the OECD, but only after substantial and dramatic progress in the peace process, Fischer says. The country has long wanted to join this exclusive rich countries club, and it is believed that Fischer sees this as being realistic.

Certainly, choosing a man of his caliber, resume and international standing could not be a bad move for a country wishing to join the club.