Taking Stock / When Spin Is of the Essence

Associates of Prime Minister Ariel Sharon insist that he fully grasps the gravity of Israel's economic problems, and is ready and willing to tackle them head-on and make hard decisions. Fat chance. Sharon can meet with Prof. Jacob Frenkel day in and day out, and much good may it do him. A great reformer, a lion-hearted budget-cutter or champion of the free market, he'll never be.

The only time on record that Sharon acted resolutely, as far as the economy is concerned - and that only to a limited degree - was when the markets drew a bead of perspiration on his forehead. When the gun-sight drifted, he went back to being, well, Sharon. But when it comes to spin, he's an economic knight in shining armor. Let's look at his harvest this week alone.

On Sunday, he summoned Frenkel to his bureau at midday, right after the government meeting, when the office was swarming with press and photographers. Naturally, on Monday the papers were blaring that Frenkel is his candidate for finance minister.

That was a double coup for the PM: He humiliated Finance Minister Silvan Shalom and prepared the ground for his ouster (if he decides he needs or wants to follow through with it). And he "proved" that he is "serious" about economics. Look! He's thinking of appointing a professional economist of international repute to the job.

Does Sharon really want Frenkel?

But does Sharon really want Frenkel, former Bank of Israel governor and current president of Merrill Lynch International, to be his next finance minister? And does this esteemed professor of economics, who spends most of his life abroad, really want to become the nation's next finance minister? Never mind. The meat is the spin, the issue itself is just gravy.

Encouraged by the success of his spin with Frenkel, Sharon went on. On Tuesday, the Prime Minister's Office leaked that he's looking for ways to depose Bank of Israel governor Dr. David Klein. Not content with merely leaking a comment of general intent, a PMO source said: "The ouster shouldn't be a surprise. The subject has been floating around for weeks." We are to understand that it's basic, banal, ordinary; all developed nations oust their central banker from time to time.

Nigglers who think that publicly beheading the governor is a radical, dangerous step simply fail to understand how the people at the PMO think. The reward is perfectly obvious, in their eyes: Every time Klein takes a whipping in public, it bolsters the impression that the Bank of Israel, not the government, is responsible for Israel's economic crisis. And there's a side benefit, too. Klein might take fright and cure himself of the nasty habit of criticizing the government's economic policy, and warning of its possible results.

Does Sharon really not want Klein?

But does Sharon really want to depose Klein? Does he even have an alternative candidate? Does the law actually allow him to fire Klein? How would investors, in Israel and without, react? Never mind. The essence is the spin, the main thing is tomorrow's headlines.

It is beautifully symbolic that between the Frenkel spin with which the week began, and the Klein spin with which it ended, the Central Bureau of Statistics published the national figures for 2002, which were far worse than preliminary estimates, indicating critical deterioration of Israel's economy. The ghastly figures won almost no press because the journalists were busy running after the eye-popping "scoops" emanating from the Prime Minister's Office, and writing reams of interpretation.

Does anybody really want the facts?

Let us try to put aside the disinformation flooding out of the Prime Minister's Office and recall a few basic facts about the four figures that starred in the headlines this week.

*Prof. Frenkel got his. He doesn't need much beyond the star treatment he got from the press this week. In case it slipped your mind, seven years ago, Frenkel had a nasty experience when then prime minister Benjamin Netanyahu appointed him finance minister. After 24 hours he had to withdraw the appointment, for political reasons. Frenkel hasn't forgotten that episode. This week, he got his compensation: He was offered the job again, he starred in the press and on TV. Now he can graciously refuse the position and return to London.

*Shalom is not the man Sharon wants as his next finance minister. The reason is simple, for a change: Shalom failed, and Sharon understands that the risk inherent in leaving him in place is big. He also understands that even before the new government cuts a single shekel from the budget, the mere act of replacing Shalom would breathe new life into the marketplace, and avert financial crisis by a few more months.

But Sharon can't declare Shalom to be the ex-finance minister because he hasn't built his next government yet. For now he's holding Shalom on a tight rein, humiliating him in public, and laughing as Shalom's wife Judy scurries from radio to TV.

Does Sharon really want Neeman?

Prof. Yaakov Neeman is Sharon's candidate to replace Bank of Israel Governor David Klein. In fact, he's the perennial candidate. His name comes up every time a finance minister or governor needs to be coerced into behaving. It suits Neeman perfectly well: It's nice and is good for business, too.

His main advantage, in the politicians' eyes, is that he swims well in political waters, while also being tightly connected with Israel's business tycoons. But Sharon also knows that Neeman comes complete with two major disadvantages. He isn't stupid, quite the contrary, so the chance of his tamely serving as the prime minister's poodle is roughly zero. Second: His economic doctrine is remarkably like Klein's and Frenkel's.

When Neeman served on the Bank of Israel's advisory board during the 1990s, he was one of the few panel members who supported the governor's tough monetary policy. In fact, the very thing that makes Ne'eman - who isn't an economist - into the theoretical candidate is that he's known as a supporter of Klein's and Frenkel's policy. In short, Sharon could replace the governor, but not the monetary policy.

*Klein has made mistakes during his three years on the job. The worst was capitulating to the prime minister's pressure and slashing interest rates at the end of 2001, based on his naive belief that Sharon would keep his promise to exercise fiscal restraint. Klein, one of Israel's leading economists, is an incorruptible servant of the public, and one of the few people in the civil service with his mind set on long-term reforms, not his next job in the business sector. He failed at management and at handling the politicians and media.

But the main reason he has gained the enmity of the politicians, and of many elements among the public, is his insistence on describing the situation of the economy, the causes, and the potential results, bluntly and accurately.

Nobody gets crowned Mr. Congeniality for describing the naked truth. Especially when the bare reality just gets uglier, day after day.