The Bottom Line / Settling Accounts With Klein

Last month, a bill sponsored by MK Amnon Cohen (Shas) and proposing to establish a five-member council of governors at the Bank of Israel won Knesset approval in a preliminary reading.

Last month, a bill sponsored by MK Amnon Cohen (Shas) and proposing to establish a five-member council of governors at the Bank of Israel won Knesset approval in a preliminary reading. According to the bill, the members of the council would include the finance minister and the minister of labor and social affairs (who now happens to be from Shas).

The bill is one of the landmarks in the ongoing struggle between the politicians and the Bank of Israel over who will rule and set interest rates for the economy. At present, all Western countries are moving toward granting more independence to their central banks, in efforts to bolster their credibility as professional bodies that work for price stability, without political considerations; but the opposite movement is afoot in Israel, where there is a search for ways to destroy the central bank as quickly as possible, to ruin its credibility and turn its decisions into political ones.

Just imagine if decisions on interest rates were to be made by Finance Minister Silvan Shalom, who has a clear political agenda and sees elections on the horizon, and Labor and Social Affairs Minister Shlomo Benizri, whose middle name is "populism." The moment they are appointed to this council of governors, Israelis will flock to the dollar, which will soar to unprecedented heights. Inflation will then take off in its wake.

This is not, of course, the first foolish attempt to destroy the Bank of Israel. Already in the 13th Knesset, Gedaliah Gal and Dan Tichon proposed legislation that would have established a council of governors comprised of political appointees named by the government. In the 14th Knesset, MKs Avraham Shochat, Meir Sheetrit and Avraham Poraz submitted a bill that was no better, proposing that one of the members of the council would be appointed by the finance minister "from among the personnel in his office" (perhaps, for example, his spokesman?) and another member would be appointed by the government (perhaps, for example, David Appel?)

The Knesset is also facing another bill, which has been sponsored by MK Mussi Raz (Meretz) and proposes that the Bank of Israel's advisory board set the interest rates. In other words, interest rates would be determined by a group controled by four senior bankers and several businessmen, who have a clear interest (worth a considerable amount of money) in the rate of interest.

Perhaps there should be a council of governors at the Bank of Israel, but it should be independent and impartial - the politicians should keep their hands off of it. Otherwise, the Bank of Israel (and inflation) will be in the same situation as the state budget, with the politicians demonstrating their full capabilities and the results plain to see.

The appointment of an additional deputy governor is also part of the same campaign to ruin the central bank. It is a golden opportunity for Silvan Shalom to get back a little at David Klein for the price the latter exacted for the recent interest rate reduction. But everyone knows that the Bank of Israel has functioned perfectly well for many years without deputies and, therefore, does not need either Meir Sokoler or Avia Spivak as seconds-in-command. The bank certainly does not need both of them.

The Bank of Israel is directed by a group of senior managers and the system works efficiently. So why are the deputies needed? Just because it is written in some ancient law? The law could also be amended, after all, and save lots of money. It is true that Sokoler's appointment as deputy will not incur additional costs; he would continue to draw the same salary and conditions. But Spivak will cost a great deal of money - his wages, office, car, driver, secretaries and assistants.

But who cares about money? And for whom is efficiency important? The main thing is that Klein's wings were clipped a little; and that is worth everything.