Bank of Israel Gov. Stanley Fischer informed Prime Minister Binyamin Netanyahu
on Tuesday that he will step down as Israel’s central banker on June 30, two
years before the end of his second five-year term.
A former chief
economist at the World Bank and MIT professor, Fischer, 69, is widely credited
with guiding Israel’s economy steadily through difficult waters.
that he was grateful for the opportunity to lead the bank, “especially during a
challenging period that included the global economic crisis, a complex
geo-political reality, and domestic social issues.”
Fischer cited the
passage of the Bank of Israel Law in 2010 as one of his major achievements,
increasing the bank’s autonomy in setting monetary policy. The law watered down
Fischer’s powers, turning over his monthly decisions on the key interest rate to
a new seven-member Monetary Committee which he chairs, but which includes three
“Research has shown that on average, group decisions
are better than decisions taken by one person,” Fischer said at the time, noting
that central banks in most advanced economies make decisions
Dr. Yaakov Sheinin, an economics professor at Tel Aviv
University, said that in addition to reshaping the bank, Fischer gave the
international community faith that Israel could keep its inflation in line with
Western countries and exerted solid influence on Israel’s political class on fiscal matters.
“Things he said on the
budget were actually taken into account,” Sheinin said.
was finance minister when Fischer was first appointed in 2005, credited him with
playing a “major role” in the country’s economic growth and
“His experience, his wisdom and his international
connections opened a door to the economies of the world and assisted the Israeli
economy in reaching many achievements during a period of global economic
crisis,” the prime minister said.
Finance Minister Yuval Steinitz said
Fischer was not only an asset for the Israeli economy, but for Israel’s
“I thank him especially for his important
contribution to Israel’s acceptance into the OECD [Organization for Economic
Cooperation and Development] and the public support in the critical period of
the Sheshinski Committee’s activity, against the intense pressure that we had to
deal with in Israel and the world,” Steinitz said.
In early 2011, Fischer
came to the defense of the Sheshinski Committee’s recommendations on how Israel
should tax its oil and gas companies.
The recommendations were ultimately
passed as law.
Interior Minister Eli Yishai said that at the helm of
Israel’s central bank, Fischer was “the envy of world’s nations.”
of the Labor Party, however, tied Fischer’s departure to the economic troubles
facing the country, saying his decision to leave was a vote of no confidence in
“Although Fischer and I often disagreed, we worked together on
the Finance Committee on legislating the Bank of Israel Law, and I can attest
that he was a brave governor, undeterred from taking unconventional steps,”
Labor chairwoman Shelly Yacimovich said.
“Given that there is no
fundamental ideological division between him and Netanyahu, his resignation
sends an alarming message to the citizens of Israel. The governor is signaling
that he is not ready to be part of the economic chaos and social hell that will
prevail after the new government forms,” she said.
Tehila Yani, co-CEO of
business information group BDI, said the announcement was problematic for
“The timing of the stepping down announcement is
problematic due to the budgetary breach, the freeze in the debtto- GDP
improvement, the increasing influence of the continuing global crisis on
Israel’s economic prosperity and the credit crunch following capital
requirements in the banks,” she said.
Labor MK Isaac Herzog praised
Fischer in his critique of Netanyahu, saying, “The citizens of Israel felt
security and peace of mind from his position as the governor.
departure, a cloud of doubt will hover over the economic policy of Binyamin
Netanyahu and the public trust will decrease even further.”
A source at
the Bank of Israel, however, said that Fischer had never been expected to finish
his second term. He made his decision to leave before the election, but waited
to announce it until afterward, to avoid politicization.
According to the
source, Fischer has not considered what he would do if the next government fails
to pass a budget within 45 days of its installation, which would trigger another
“I don’t see in this a drama. It’s not that he’s
escaping,” said Sheinin, who believes Fischer’s departure will not hurt the
“I think he did great things, but the State of Israel will be
able to find a replacement from among its economists.
The graveyards are
full of irreplaceable people,” Sheinin said.
Fischer was current US
Federal Reserve Chairman Ben S. Bernanke’s thesis adviser.
1988 to 1990, he was chief economist at the Washington- based World Bank. At the
International Monetary Fund in the 1990s, he worked to resolve financial crises
in Mexico, Russia and Southeast Asia.
Fischer was approached in early
2005 by then-prime minister Ariel Sharon and by then-finance minister Netanyahu,
to succeed David Klein as central bank governor despite not being either an
Israeli citizen or resident.
In 1960, Fischer spent six months at Kibbutz
Ma’agan Michael near Hadera, where he combined learning Hebrew with manual
In 2011, Fischer put himself forward as a candidate for the
leadership of the IMF. He was disqualified for the post as he was over the
organization’s age limit of 65, and the position went to France’s Christine
Two possible candidates to replace Fischer could be Avi
Ben-Bassat, former finance ministry director-general, and Zvi Eckstein, ex-Bank
of Israel deputy-governor, said Jonathan Katz, a Jerusalem-based economist for
HSBC – banking and financial services.
Replacing Fischer would be “a
major problem for Netanyahu as Stan has been a confidence-inspiring figure,”
said Nobel economics laureate Robert Solow, a former teacher and colleague of
Fischer’s at MIT. “Everyone knows with Fischer nothing stupid was going to
Yaniv Pagot, chief strategist at the Ramat
Gan-based Ayalon Group, agreed.
“This isn’t good news and the markets are
reacting accordingly,” he said. “Fischer was the foreign minister of Israel’s
economy. Much depends on who will replace him and he leaves very big shoes to
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Bloomberg contributed to this report.