hirchson budget 88 298.
(photo credit: Ariel Jerozolimski)
Even as the investigation surrounding Finance Minister Avraham Hirchson escalates and Amir Peretz publicly staked a claim on the portfolio should Hirchson be forced to step down, market analysts and economists were unfazed about the prospects of a change at the top of the Treasury.
"There is no reaction at this time in the market regarding Peretz's announcement. It is not an issue and the market is not taking the announcement and its chances of success seriously," said Vered Dar, chief economist and strategist at Psagot Ofek Investment House. "Even if Hirchson should have to resign, we are not likely to see a dramatic reaction in the market given that Hirchson has not held his position for very long driving significant reforms or changes like Binyamin Netanyahu, who had gained high credibility."
After being harshly criticized in his post as defense minister for a year, Labor Chairman Peretz now wants to move on to the Finance Ministry. In an effort to energize his flagging campaign for party leadership, Peretz announced on Tuesday night that if he won the upcoming primary he would seek to switch his portfolio from defense to finance.
"The market already assumes that Peretz will not be able to get the finance portfolio and thus we have not seen any reaction at all," said Avi Weinreb, trader at Clal Finance Batucha.
Meanwhile, speculation about other possible successors to Hirchson has focused on Interior Minister Roni Bar-On and former justice minister Haim Ramon.
"Both candidates could be sound potential finance ministers, but I believe that Ramon has the background and ability to push reforms and he is knowledgeable in economics," said Shlomo Maoz, chief economist at Excellence Nessuah.
Weinreb pitched former finance minister Netanyahu as the next Treasury chief the capital market would like to see.
Peretz's announcement follows recent calls to suspend Hirchson in light of the criminal investigation opened against him into the embezzlement of millions of shekels from the Nili, the National Workers Organization.
This week, the Movement for Quality Government in Israel asked the High Court of Justice to order Prime Minister Ehud Olmert to suspend Hirchson as long as a criminal investigation is underway, claiming he is unable to give proper attention to his job during the probe.
"The de facto impact of this situation at the moment is that the whole Finance Ministry is not functioning properly and thus reforms such as the car tax reform are being help up," said Psagot Ofek's Dar.
Similarly, Maoz raised concerns that if the situation of having a finance minister who is not able to act on important reforms were to drag on for more than a month or two, the economy could be damaged.
Peretz initially sought the finance portfolio during the initial coalition talks last April, but instead ceded to Olmert's offer of the Defense Ministry.
Now, just as he is seen by many to have been unprepared and lacking the basic qualifications to be defense minister, Peretz is considered by the market to be similarly unqualified to be finance minister.
"Peretz clearly has less good chances as on the one hand he would not be welcomed as finance minister by the capital market and foreign investors and on the other hand he does not have the credibility to manage the ministry in order to drive reforms through," said Maoz.