The Bottom Line / Price and Prejudice

Finance Minister Silvan Shalom wanted to get his Bank of Israel law passed in a three-day blitz. He wanted the government to approve it on March 10 and then to race the three readings through the Knesset by March 13, before the MKs went off to enjoy their recess. He knew that the government supported the bill, and he believed the Knesset would give its majority backing. The only thing he did not take into account was the media. That came out unanimously against the minister's bad proposal, and managed to prevent those pearls of wisdom from the school of Shalom, Ohad Marani and Nir Gilad from hitting the statute books.

When these treasury heads first unveiled their proposals, they had the chutzpah to say (or write) that the bill was just like the recommendations of the Levin Committee, with slight changes in phraseology. But there is nothing further from the truth. But this is how they managed to mislead the public and even the prime minister. They also said that the governor of the Bank of Israel had agreed - though no such agreement had been reached - and the dispute continues to this day, over the following:

1. The objectives of the Bank of Israel. The treasury wants a series of aims - price stability, employment and growth - while the governor wants just one: price stability. He is prepared to accept the British formula, that states the bank's other objectives will be without prejudice to the primary objective, that of price stability.

2. The Bank's independence. Throughout the world, the central bank's independence is a cornerstone of the constitution, of which everyone is proud. Even the politicians. But here in Israel, Shalom wants to control the central bank, and so the treasury is not prepared even to slip in a declaratory clause on the bank's independence nor to allow the bank independence on the use of monetary instruments such as the liquidity ratios.

3. The monetary council. The governor wants to choose the bank's members of the council himself so that they should be professionals: the manager of the monetary department or manager of monetary research. The treasury however wants them to be the two deputies of the central bank, which would put Avie Spivak (Shalom's appointment) on the council.

4. Externals. The Finance Ministry wants these external members of the council to be businessmen. In this way they will support cutting the interest rate, as businessmen always want a lower interest rate, because they always want to pay less, and inflation doesn't worry them - on the contrary, even.

But in the meantime, the wind's been taken out the treasury's sails. Not only is the three-day blitz no longer mentioned, but the ministerial committee on constitutional matters has not even penciled in a date for discussion. The Knesset too is another story, because there they do not even know what lies in the balance. Not only were MKs prepared to let the prime minister do the choosing, they even suggested that the Knesset Finance Committee get the pick of two out of the seven. Neither Knesset nor treasury understand that without a strong, independent Bank of Israel, and without an independent professional governor's council, we will all end up paying a heavy price.