Stanley Fischer speech at BGU 311.
(photo credit: Dani Machlis/BGU)
Bank of Israel Gov. Stanley Fischer admitted on Monday that nationwide protests
over the high cost of living took him by surprise, and said the problem was
mainly a result of market concentration.
Fischer called for the
establishment of a committee to investigate the disparity in prices between
Israel and the rest of the world.
“I assume the problem is a lack of
competition,” he said, speaking at a press conference at his Jerusalem
“We pay too much for vehicles because of the import tax, among
other things. My impression is that the prices in Israel are very
Fischer said there were four main problems that had to be dealt
with: high housing prices, the cost of living, tax policy, and the government’s
ability to provide services the public needs in a manner befitting the changing
It was the first time Fischer has spoken out publicly on the
cost of living since demonstrators began erecting tents in major cities more
than two weeks ago to protest the rising cost of housing.
protests “very dramatic,” he said: “It was surprising, because according to all
the economic data the market is very strong, with a low unemployment rate. But
you can’t not be impressed by the fact that 150,000 people came to the
demonstrations on Saturday night, and by what is happening in the tent cities
all around the country.”
Fischer spoke in depth about the housing crisis,
rejecting criticism that the blame for soaring prices could be pinned on his
dramatic lowering of the benchmark interest rate starting in September
“Had we not lowered the interest rate and just kept it at 4.25
percent, we wouldn’t have a housing problem, but instead we would have an
unemployment problem similar to that of the USA and Europe, where it has reached
almost 10%,” he said. “In addition, had the interest rate been higher, there
would not have been more homes but rather less.”
The central bank
governor welcomed Prime Minister Binyamin Netanyahu’s initiative to review
taxation policy and recommended he first examine the increase in indirect taxes,
such as VAT, compared with the drop in direct taxes, such as those on income.
But he warned against reacting too quickly to protesters.
“There are no
magic solutions to the problems,” Fischer said.
He also backed the prime
minister’s National Housing Committee’s bill, which is intended to speed up
housing construction by sending projects marked for expedited construction to
subcommittees, and called for supervision teams to be established, as was done
in the 1980s to deal with hyperinflation.
Turning to the protesters
themselves, Fischer said they were the people who contributed to the state and
its economic success, but their demands were political, and if they wanted to
impact policy they must move beyond demonstrations and into the political
“They must enter politics,” he said. “Work in the Knesset is
difficult, convincing people is a more difficult job than determining the
interest rate. [But] if the demonstrators don’t enter politics, it will be a
loss for them and for us all.” •