PM Finds for Central Bank

Prime Minister Benjamin Netanyahu has ended the years-long feud simmering between the Bank of Israel and Finance Ministry over supervision of wages, and he found for the bank.

The issue of veto power over Bank of Israel wages is part of the new Bank of Israel law taking shape. Since the Finance Ministry and Bank of Israel proved unable to reach common ground on the issue, the prime minister - as he had threatened - intervened and handed down a binding ruling.

Which is: In the event of dispute between the governor of the central bank and the Finance Ministry regarding wages of Bank of Israel workers, a ruling will be handed down by the prime minister. His will be the final authority, not the finance minister, Netanyahu decided.

Until now that power had been the prerogative of the finance minister.

The prime minister's decision will be binding and final: no appeal will be possible.

Actually, both sides declared victory in the dispute, though Netanyahu's decision could prove to be a precedent that weakens the position of the public-sector wages director at the treasury. Theoretically other powerful bodies, such as the Israel Electric Corporation or universities, could also seek to shake off his authority over their pay practices.

The ministry will continue to supervise central bank wages, as it does pay at all state bodies, Netanyahu ruled. But the Bank of Israel will be entitled to appeal ministry rulings on pay to the prime minister.

An appeal would be brought before a 3-person panel of experts. The panel chairman must be qualified to serve as a Labor Court judge. If the central bank doesn't like the panel's ruling, it can appeal to the prime minister.

The compromise acknowledges, if only indirectly, that because of their engagement in parallel areas, professional disagreements between the Finance Ministry and Bank of Israel could spill over to more personal areas, such as salary levels.

Meanwhile, the Finance Ministry and Bank of Israel have found common ground on other areas in dispute, such as the composition of the monetary council. The council is a wholly new body that will be established after the new Bank of Israel law is enacted. It will be responsible for designing economic and monetary policy at the central bank, currently the prerogative of the governor, today Stanley Fischer.