Bank of Israel Governor Stanley Fischer on Sunday accused the Finance Ministry of starting a "war" over reforms to the way the central bank makes monetary policy and other decisions.
Fischer said he had been working for four years on making sweeping changes to the Bank of Israel law, in place since 1954, but the ministry continued to block progress over demands that it supervise central bank wages.
Among the changes Fischer seeks is the creation of a board of governors -- in common with many other central banks -- that would make interest rate decisions. At present, the governor alone makes the decision, after consultations with Bank of Israel department heads.
The bank would keep controlling inflation as its main monetary policy mandate, but also take into consideration supporting growth and employment.
According to the Bank of Israel's proposal, the board would be chaired by the governor. The deputy governor and another central bank official would also be members, as would a few non-bank economic professionals.
'Good for TV - not good for the economy'
Fischer believes the changes would ensure the independence of the Bank of Israel and bring its operations to the level of the world's top central banks.
"A new law would contribute to the economic and financial strength of the State of Israel. It will not help me," Fischer told a news conference. "It's easier for me to make all the decisions but ... committees usually make better decisions than a single person."
The government and Bank of Israel have tried to introduce major reforms since 1997 but Fischer took it upon himself to advance the law when he took over the central bank's reins four years ago.
The main sticking point is over what the Finance Ministry believes are excessively high salaries at the central bank. The ministry is looking to supervise those wages.
Fischer is in favor of external wage supervision in the form of a committee, with the final word coming from the prime minister.
"It is not acceptable for the Finance Ministry to have a tool in its hands to use against the Bank of Israel every time there is a disagreement," Fischer said. "I don't want a war with them. I want to return to negotiations."
Fischer said he preferred to conduct the talks in private, but the ministry had started a media campaign last week.
"It's good for TV but it's not good for the economy," he said.