The Governor's Zigzags / Fischer's Patience Runs Out

After four years in Israel, Stanley Fischer is beginning to behave like an Israel. He's beginning to lose his Anglo cool; he's beginning to understand that he made a mistake, that he was naive and in Israeli politics you can't believe anyone and have to nail down every agreement tightly so it can't be misinterpreted.

The Bank of Israel governor thought that after signing the new wage agreement for his employees, that was the end of the disagreement between the central bank and the Finance Ministry. But to his amazement, the petty officials in the treasury's wages division still haven't come to terms with the agreement and continue to attack it in the press.

But what is really getting the governor's goat is the treasury's behavior when it comes to the new Bank of Israel Law. The talks between the two entities dragged on for three and a half years, not counting the negotiations during the terms of Fischer's predecessor, David Klein, and nothing advanced. There was always something holding up the legislation: a new prime minister, a new finance minister, a new wages director.

A law that was supposed to be passed within a few months drags on for years. Now just 10 months are left in Fischer's term and the bill is nowhere near being passed.

Fischer loves to talk up the new monetary committee that is part of the bill, which is to decide on bank policy, including setting interest rates. When Fischer became governor about four years ago, he wanted a five-member committee, headed by him, with two representatives from the central bank and three external members. Just five months later Fischer began to grasp the realities of life in Israel, and changed his mind.

Now he wants a six-member committee, divided evenly between BoI and external representatives, with himself as chairman with a double vote in the event of a tie. Recently he changed his mind yet again and reverted to the five-member idea, but this time with a clear BoI majority: three Bank of Israel representatives, including the governor-chairman, and just two external members.

What's behind the shift? The governor realized that in 21st century Israel one does not concede power, and that power must not only exist, it must be seen to exist. Nevertheless, in the existing systems there may be those who question the legitimacy of decisions that ended with a tie broken by the chairman's double vote.

Officials at the Bank of Israel love reminding their audiences that there are public sector employees, such as those who work in the State Comptroller's office, whose wages are not supervised by the treasury's wages director.

In other words, the Bank of Israel would not be setting a precedent by removing itself from the director's watch as provided in the central bank's proposal for the new Bank of Israel Law.

According to the bank, the Finance Ministry sees the BoI as a rival for its economic-policy turf and attempts to undercut the central bank at every opportunity. The fear is that the treasury will try to use the wages of central bank employees as a weapon in battles over economic principles.

Now it is Prime Minister Benjamin Netanyahu who is being tested. Eleven years ago he initiated the effort to get the new Bank of Israel Law passed, and a month ago he named his best aide - the director general of the Prime Minister's Office, Eyal Gabai - to push the bill. He's the one who has to end this journey, and soon.