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Ben Bernanke to replace Stanley Fischer? Photo: AFP
Ben Bernanke to replace Stanley Fischer? Photo: AFP
 
Dr. Karnit Flug. Temporary replacement Photo: Gil Yohanan
Dr. Karnit Flug. Temporary replacement Photo: Gil Yohanan
 
Fischer. Cost of farewell celebrations could reach NIS 400,000 Photo: Gil Yohanan
Fischer. Cost of farewell celebrations could reach NIS 400,000 Photo: Gil Yohanan
 
 

Netanyahu seeking foreign BOI governor

Prime Minister approaches Federal Reserve Chairman Ben Bernanke, three other world famous candidates with offer to replace Stanley Fischer as head of Israel's central bank. Karnit Flug to serve as acting Bank of Israel governor until government appoints successor

Gad Lior
Published: 06.18.13, 13:14 / Israel Business

The next Bank of Israel governor will likely be a world famous foreign economist rather than a professor of economics living in Israel. The Yedioth Ahronoth daily has learned that Prime Minister Benjamin Netanyahu turned in recent days to at least four candidates living and serving in senior positions abroad.

 

On Monday, the prime minister convened a special meeting on the matter in the presence of outgoing Governor Stanley Fischer, who has so far been pushing for the appointment of his deputy, Dr. Karnit Flug, as his successor.

 

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Protesters surround Stanley Fischer in Tel Aviv / Gilad Morag
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Fischer will step down at the end of June, and as of July 1 Flug will serve as acting Bank of Israel governor for several weeks until the appointment of a permanent governor. Fischer will have served as head of the central bank for eight years and two months and is not interested in extending his term.

 

Secret discussions on the selection of the next governor have been held in the past week at the Prime Minister's Office. Finance Minister Yair Lapid has been updated by Netanyahu on the matter, but on Monday it was made unequivocally clear that the next governor will be chosen by the prime minister "in consultation with the finance minister."

 

So far, appeals have been made to several candidates, and the prime minister is waiting for responses from four of them. One of those wooed by Netanyahu is Israel Prize laureate Prof. Elhanan Helpman, who has been living in the United States for years. Helpman rejected the offer, but attempts are still underway to convince him to assume the role.

 

Awaiting responses

Netanyahu has also approached Federal Reserve Chairman Ben Shalom Bernanke, 60, who will be ending his term soon after eight years in office. Bernanke, a Jew, has an Israeli connection as well: Stanley Fischer was his thesis advisor at MIT.

 

Another candidate is Martin Eichenbaum, a professor of economics at Northwestern University and co-director of the Center for International Economics and Development. Eichenbaum has taught at the world's leading universities and has been a consultant to the Federal Reserve Banks of Chicago, Atlanta, and San Francisco. He is an international expert on monetary policy.

 

Prof. Helpman, who rejected the offer to be appointed as governor, has not been living in Israel for many years but started his career in economics in the Jewish state and was awarded the Israel Prize for economics 22 years ago. He served as a member of the advisory board of the Bank of Israel and the National Council for Research and Development and is considered one of the 25 most cited professors in the world.

 

Since 2002, Helpman has served as professor of international trade at Harvard University. His academic research focuses on international trade and economic growth and he is one of the founders of the new trade theory and endogenous growth theory.

 

Several Israeli economists have presented their candidacy for Bank of Israel governor as well, and some of them even met recently with the prime minister and finance minister. The Israeli candidates included Prof. Manuel Trajtenberg, Prof. Zvi Eckstein, Prof. Avi Ben-Bassat, Prof. Leo Leiderman, Prof. Daniel Tsiddon, Prof. Eran Yashiv and former Finance Minister Director-General Yarom Ariav.

 

The decision on the identity of the next governor will be made soon, although the Prime Minister's Office is inclined to wait for the responses of the foreign economists. When the governor's appointment was delayed in the past, then-Deputy Bank of Israel Governor Dr. Meir Sokoler served as a temporary replacement for four months.

 

The prime minister and finance minister will bring the decision on the favored candidate to the government's approval, and the new governor will then be sworn in by President Shimon Peres.

 

Fischer's 'farewell festival'

Tuesday is set to be a festive yet somewhat sad day at the Bank of Israel. On the one hand, the central bank is kicking off its farewell celebrations for the outgoing governor, which will be marked with lavish events and distinguished guests. On the other hand, many have expressed their concern over the departure of the Israeli economy's "responsible adult."

 

"Here comes the farewell festival," some Bank of Israel employees said Monday, expressing their discontent over the extravagant events accompanying the governor's departure. Yet other noted that Fischer, who was the best Israeli ambassador in the world since his appointment in May 2005, deserved an honorable goodbye.

 

The Israel Museum will host a festive event Tuesday in honor of Fischer, including a professional conference. The event will be attended by European Central Bank President Mario Draghi and the central bank chiefs of Chile and Ireland. Larry Summers, a personal friend of Fischer who served as US secretary of the treasury under President Bill Clinton and an economic advisor to President Barack Obama, will also be present.

 

The event will also be attended by former Bank of Israel governors, led by Prof. Jacob Frenkel, who will address the conference participants.

 

According to a statement issued by the Bank of Israel, "This is one of the most important professional conferences held in Israel in years, and we should be honored by the fact that governors and such senior guests are arriving at the conference to discuss the global economy at these times of crisis."

 

Another festive farewell party will be held on Sunday in the presence of the prime minister, ministers, leading economists and senior Bank of Israel officials from the past and present.

 

The cost of the two events, according to the central bank, will total NIS 250,000 (about $70,000), but sources involved in the events' organization say that the cost could even reach NIS 400,000 ($110,000), including the accommodation of the foreign officials.

 

On Monday, the central bank's Monetary Committee will make its decision on July's interest rate policy. It will be the last time Fischer chairs the committee as it makes an important decision for the Israeli economy.

 

 

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