"The job of the Ministry of Finance is not easy nowadays because of the pressures to make various measures that do not conform to economic policy. Nonetheless, the Ministry of Finance has not capitulated to this hyperactivity," said Governor of the Bank of Israel Prof. Stanley Fischer at the "Forbes" conference marking Israel's 60th anniversary today. His comments were directed at Manufacturers Association president Shraga Brosh and Histadrut chairman Ofer Eini, who propose the establishment of a social-economic council.
Fischer has already been a target of Brosh and Eini, who recently tried to abolish the Bank of Israel's exclusive authority in setting interest rate policy. Fischer stressed the importance of the independence of the Bank of Israel.
"The independence of the Bank of Israel is critical for economic success because of possible destructive desires by the government if it asks the central bank to print money. Such a demand can have many forms, such as a demand to cut the interest rate, which will boost growth in the short term but will ultimately cause inflation," noted Fischer.
Fischer continued, "There are many cases that demonstrate that economic performance is better when the central bank is independent. Foreign investors take the independence of the central bank into account when making investment decisions. This is seen in the ratings. It's important that the independence of the central bank be accompanied by cooperation with all sectors, and in this context I wish to note my excellent cooperation with the minister of finance and senior Finance Ministry officials.
"Cooperation was lacking in the past, which did not help the economy. The modern concept of the independence of the central bank is reflected in the laws of advanced countries. This is also part of the concept that I am formulating with the Ministry of Finance - the Bank of Israel Law. This law will serve the economy and the public in the best way. By the way, the new law is not so convenient for the bank because today I make the decisions, but in the future, the decision will be made by a committee and will not be mine alone." It should be noted that the governor will have a double vote on the monetary committee.
Fischer said, "It's very hard to persuade people that the law is not aimed at making the life of the governor easier, but to contribute to the future of the economy. I hope that that the government will submit the bill soon and that it becomes a cornerstone of the Israeli economy and the pride of the country after 60 years of independence."
Published by Globes [online], Israel business news - www.globes-online.com - on April 14, 2008
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