"We have already passed the most serious situation in the global crisis, which reached its peak at the end of 2008, but the crisis in the world's real economy continues. In the financial markets, the second quarter was the best we have seen for years; the bond markets, both government and corporate, are once again starting to operate seriously," Governor of the Bank of Israel Stanley Fischer said today at the Caesarea Forum.
"The crisis in the real economy is still with us," Fischer continued. "The assessments are that the turning point will come in the second half of the year, or in the first quarter of 2010." Fischer mentioned favorably the situation of the Asian countries, whose position is improving faster than that of other places. The problem, he says, lies in the developed markets.
On the panic that seized the markets in the current crisis, Fischer said, "This is the worst panic I have ever seen, and the worst since the 1930s, when the situation in the financial system was a great deal more complicated than in the current crisis."
Commenting on the Israeli economy, Fischer said, "In a word, the situation is hard. But in two words, the situation is relatively good. We have passed the toughest part; the mood is improving all the time. Several industries believe they will start to grow by as soon as the third quarter of the year, so that we may see growth before the end of the year, but it is clear to us that unemployment will continue rising, because that is how things always are at the end of a recession and at the beginning of the recovery. The problem is that the public will say that it's fine that there's growth, but will ask, 'What's happening with us?'"
The Governor of the Bank of Israel also commented on the highly publicized dispute between the bank and the Ministry of Finance over the Bank of Israel Law and the section on control of salaries at the central bank. "The current situation is that the Ministry of Finance supervises salaries at the Bank of Israel. That is not a healthy situation, because there is built-in tension between those two institutions," Fischer said. "The fact that the Ministry of Finance has that power today, makes it almost as though it runs the bank… it's important that each should know what his role is.
"The prime minister, assisted by Eyal Gabai and his ministry, was involved in formulating a compromise that will be in the law, a compromise that I find reasonably fair and I hope we will all live in peace with it. I should have preferred supervision by the bank's board, but in Israel, that's impossible. In my opinion, the new law will bring order to the relationship between the two institutions, and that is healthy over time. At last we will understand what authority belongs to whom," Fischer said.
Published by Globes [online], Israel business news - www.globes.co.il - on July 2, 2009
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