"Bernanke talks about the recession finishing, perhaps in late 2009 or early 2010. Everybody thinks that's excellent," Governor of the Bank of Israel told a seminar held in the Knesset today on "Preparedness of the State and the Knesset during the Recession."
Fischer added, "But it is important to remember that the end of the recession is at the end of a period where everything is falling. The economy must then start out from the lowest point - the public still won't be feeling good. The economists will be feeling good because the figures will be good, but that won't be expressed in the field because the economy will be in the worst shape."
Fischer continued, "The fall in Israeli exports is very real, 40% at an annualized rate in the fourth quarter. The situation has now been reversed from what it was 20 years ago when the problem was whether the banks of developing countries could pay the banks in the developed world. Now it's the opposite and the question bothering us is if American banks will be able to pay Israeli banks."
"The Israeli economy has already entered a recession. There are complaints that we keep changing our forecast. But the situation is not static and every day we get more information. Either you sit still and don't change, or you update and change, and that's what we are doing. Our forecast stands at minus 1.5%. Most developed countries are in a worse situation."
Fischer's speech was suddenly interrupted when he praised the plans, which in his words have been "approved by the Knesset." MKs complained that he was talking about the Ministry of Finance's plans and not the Knesset's plans. Fischer said, "I'm not accusing anybody. I think they are good plans."
Fischer reiterated that the problem in the credit market is the collapse of the non-banking system which has almost completely disappeared.
Fischer said, "If one tycoon falls we can cope with that but if we have a serious and general problem with the debts of corporation then there will be trouble."
We must examine how to revive the bonds market. There are credit recycling funds but we are looking at additional methods. It is important not to delude ourselves. We cannot give companies all the amount of credit that they previously got. It was overdone and it would not be right to return to the situation as it was two years ago."
Referring to the plan to assist the economy submitted last week he said, "They say that the plan is relatively modest. We could have presented something more grandiose but who would finance it?"
This is a recessionary period in which it is worthwhile increasing expenses but only while within the budget framework. The estimate is that the deficit will be 6%. That's a problem. You have to cope with this MKs. We all want to give money but we can't. The aim must be to return to sustainable growth."
Published by Globes [online], Israel business news - www.globes-online.com - on March 17, 2009
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