Flug appointed Bank of Israel Governor

Prime Minister Benjamin Netanyahu has been impressed by Dr. Karnit Flug as Acting Governor and performed a u-turn to make her head of the central bank.

Karnit Flug has been appointed Governor of the Bank of Israel. She has been serving as acting governor for 111 days since Stanley Fischer stepped down at the end of June. She is the first woman to serve in the post, having been deputy governor under Fischer and Acting Governor since his departure.

"We have been impressed by the performance of Dr. Flug as the head of the Bank of Israel in recent months, and we are confident that she will continue to help us take the Israeli economy to new achievements in the face of global economic upheaval," said the Prime Minister's Office in the statement announcing the appointment.

Flug's appointment comes after Prime Minister Benjamin Netanyahu and Minister of Finance Yair Lapid were deadlocked on the three candidates approved by the Turkel Committee - Mario Blejer, Zvi Eckstein, and Victor Medina.

Netanyahu had opposed Flug's appointment, despite Fischer's recommendation. Lapid had supported her initially, before shifting support to Eckstein after Netanyahu vetoed Flug. Now Netanyahu has performed a u-turn.

"It's over," one of Netanyahu's aides told "Globes" today. Netanyahu and Lapid discussed the governorship last Wednesday, after avoiding the subject for three weeks, but they could not bridge their divide.

Flug was Fischer's candidate as his successor, but Netanyahu utterly refused to accept her. Her return had been mooted during the past week, after several top Bank of Israel officials began pressing Bank of Israel workers committee chairman Yehuda Vazana to withdraw a complaint he had filed with Attorney General Yehuda Weinstein against Flug and her husband Prof. Saul Lach about a harshly critical report from 15 years ago. The Turkel Committee had examined the matter when it recommended her to the post of deputy governor two and a half years ago.

The report, which "Globes" revealed, concerned Lach's employment by the Bank of Israel's Research Department when Flug was deputy department director. Lach was paid NIS 108,000 for his services.

The lack of a permanent governor has been especially problematic lately, after two members of the Monetary Committee opposed Flug's decision in September to cut the interest rate for October to 1%, on the grounds that it further inflated the housing bubble and would not support exports.

Former Deputy Governor of the Bank of Israel Zvi Eckstein has congratulated Flug on her appointment.

Published by Globes [online], Israel business news - www.globes-online.com - on October 20, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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