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(photo credit: Ariel Jerozolimski)
The Finance Ministry on Sunday played down harsh criticism of Bank of Israel Governor Stanley Fischer by some of its officials.
Senior Treasury officials reportedly mounted an unprecedented attack on Fischer during an internal meeting last week regarding his decision last Tuesday to purchase government bonds.
The criticism was triggered by rumors that Fischer, whose five-year term ends in May 2010, was considering a second term. The officials were said to be outraged over the conditions demanded by Fischer for staying another term, which reportedly included flexibility in setting Bank of Israel salaries, consolidation of the central bank's supervision of banks department with the Finance Ministry's supervision of capital markets, insurance and savings, and the passage of the new Bank of Israel Law.
"There's no limit to his cheek," an unnamed official told Army Radio on Sunday. "This big shot comes from abroad and sets conditions for us. If he doesn't want to continue, he doesn't need to. We don't need his favors."
"Every two days he convenes a press conference so that everyone should praise him," the official said. "Interest rates, unemployment, the Integrated Index, foreign currencies, bonds - every day, they appear in the media. He complains about infinite leaks, but he doesn't shut his mouth himself. Everyone in the media idolizes him, but we come off badly."
In reaction, the Finance Ministry said the criticism did not represent the view of Finance Minister Ronnie BarOn, adding that Fischer had made a significant contribution to the Israeli economy.
"The good cooperation between the finance minister and the governor, and between the ministry and the Bank of Israel, have doubled the government's strength in dealing with the global crisis and its ability to take effective measures to bolster the Israeli economy," the Finance Ministry said in a statement Sunday. "We must continue to act in order to strengthen this bond."
"Even if there are professional differences of opinion, the way to solve them is by cooperation and discussion, not by leaks to the media," the statement said. "... The remarks broadcast on Army Radio [Sunday] morning aren't shared by the finance minister."
The unnamed Treasury official reportedly criticized the central bank's decision to buy government bonds as being unlawful and being akin to "printing money," as well as having an inflationary effect.
The Bank of Israel began buying government bonds in open-market operations last Tuesday in a move it said was aimed at lowering long-term interest rates and making more liquidity available to the financial system. Fischer is using open-market operations to boost the sagging economy as the base lending rate nears zero.
Speaking at a conference on Thursday, Fischer said the bank wasn't "printing money" because the purchases are of debt that has already been issued and that any inflation caused in an environment of low inflation was desirable.
Bloomberg contributed to this report.