Flug, 58, was chosen from a shortlist of candidates that included former Argentinian central bank president Mario Blejer, former Bank of Israel Deputy Governor Zvi Eckstein and former Mizrahi-Tefahot Bank Chief Executive Victor Medina.
Explaining the choice, Netanyahu and Lapid said: "We were impressed by Dr. Flug's performance in recent months as acting governor, and we're certain she'll continue to aid us in marching Israel's economy forward to further achievements facing the global economic turmoil."
Dr. Karnit Flug (Photo: Gil Yohanan)
Upon hearing of her appointment, Flug thanked Lapid and Netanyahu and said the Bank and the economy face significant challenges and she looks forward to working with the Bank's dedicated and professional staff as well as with various government officials in order to face these challenges.
Flug will be Israel's first female governor, coinciding with US President Barack Obama's appointment of the US's first Federal Reserve chairwoman – Janet Yellen.
BOI employee since 1988
Flug, 58, has been acting as governor since Stanley Fischer stepped down in early July after eight years in the job, and was his choice to fill the role. Flug began working at the BOI in 1988. In 2001 she was appointed manager of the research department and in 2011 assumed the role of deputy governor.
Flug was appointed after two former candidates, Prof. Jacob Frenkel and Prof. Leo Leiderman, nominated by Netanyahu, pulled out of the race.
After Leiderman's initial nomination, Flug announced her resignation in 30 days time. However, after Leiderman withdrew she stated she will continue as acting governor until a replacement is found.
In an interview to Yedioth Ahronoth she said at the time: "I don't understand why the PM disqualified me. What's the reason? It's a puzzle," and added that "I think I've proven I'm fit to be governor."
Netanyahu, as said, opposed Flug's nomination in the past, even though Stanley Fischer urged him to appoint her.
It appears Netanyahu and Lapid were at odds over their favorite nominees, Victor Medina and Prof. Zvi Ekstein, and when only the Argentinian Mario Blejer remained, Karnit Flug's name came up again. Most likely her successful performance as acting governor played in her favor, and Netanyahu withdrew his veto against her appointment.
Fischer's initial replacement was supposed to be Prof. Jacob Frenkel, who held the position between 1991 and 2000, but a scandal surrounding an alleged shoplifting incident in Hong Kong's airport several years ago led him to withdraw his candidacy.
Several days later Netanyahu and Lapid announced a new candidate, Prof. Leo Leiderman, only to be disappointed yet again when three days later Leiderman, an economics professor in Tel Aviv University and former Bank of Israel division head, also withdrew, citing personal reasons.
His announcement was a surprise, but later, reports surfaced that his withdrawal may have been related to his resignation from Deutsche Bank, the reasons for which he wished to remain hidden.
Several days later, on August 8, the PM and the finance minister filed four candidates with the Tirkel Committee for a vetting process – Prof. Mario Blejer, Prof. Zvi Ekstein, Victor Media and Michal Abadi Boyanjo – who has withdrawn her candidacy.
Though all were okayed by the committee, the appointment was delayed for long weeks, and Flug continued to act as governor until today's announcement.