Governor of the Bank of Israel Prof. Stanley Fischer recently hinted that he would quit if the government decides to breach the budget framework. The Labor Party has demanded that the increase in government spending be raised to 2.5% of GDP, from 1.7%, as a condition for joining a government headed by Kadima chairwoman and Minister of Foreign Affairs Tzipi Livni.
Sources inform ''Globes'' that, a few days ago, Fischer told an associate that he would find it difficult to stay in his job if Livni capitulated to Labor Party chairman and Minister of Defense Ehud Barak's demand. Fischer declined to attend yesterday's meeting between Livni, Barak, and top economists, which discussed expanding the budget. Fischer said that there was nothing to talk about.
Fischer said that Israel committed to the Americans, as part of the US loan guarantees, not to breach the budget. He said that any decision to the contrary would destroy his credibility.
Fischer's aides interpreted his comments to mean that he would not stay on under such circumstances. They added that, during the meeting, Fischer said that a conservative policy was essential in view of the expected drop in tax revenues and in the shekel-dollar exchange rate, which were battering exporters' revenue and causing foreign capital flight from Israel. He told associates that keeping the budget basis was not sacred, but under the current circumstances, it would be wrong to increase it.
Fischer added that he was very frustrated, since even a divided US government on the eve of elections was able to reach agreement and approve the bailout plan, yet Israelis were unable to compromise.
The Bank of Israel declined to comment on the report.
Published by Globes [online], Israel business news - www.globes-online.com - on October 6, 2008
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