Stanley Fischer 311.
(photo credit: Bloomberg)
The word “concern” can describe most thoroughly Bank of Israel Governor Stanley
Fischer’s mood, at least according to what he said at a press conference on
Tuesday. In the meantime, Fischer is not expressing more than concern. His
essential message can be reduced to a warning not to increase expenditures and
not to let the deficit expand beyond what stems from slowed
Fischer suggested to the social-protest leaders that they make do
with the Trajtenberg report, though there are signs that its implementation is
in doubt. Everything not included in the report, Fischer believes, is just
But the ones who should be listening to Fischer’s warnings are
actually Prime Minister Binyamin Netanyahu and Defense Minister Ehud Barak. If
these two former commandos begin horse-trading on this issue, as is their habit
with other issues, they might find themselves face to face with
Fischer.Signs of weakness
Fischer tried to give a balanced macroeconomic
forecast of what the Israeli and global markets should expect. Among all the
numbers, there is one piece of data that should have all decision makers
worried: For the first time in eight years, Israel will show a current-account
deficit. This piece of data reflects the fact that the world debt crisis is
signaling its arrival, and the Israeli economy is showing signs of weakness,
even if growth statistics are still strong.
Fischer sounds much more
worried, though, about the situation in Europe. The two alternatives –
protecting the euro by the largest EU countries entering into a recession and
making huge sacrifices, or dismantling the euro zone and reestablishing it in
northern Europe only – are somber, ominous and full of dangers.Much more
While everyone is looking toward the European Central Bank, Fischer’s
forecast, as with its two alternatives, explains something about the things
currently being said by central-bank leaders.
The Fischer of November
2011 is much more gloomy than the Fischer we used to know in 2008. His
appearance reminded me in many respects of his speeches during the year of the
financial crisis, when Fischer told the Israeli public a financial and economic
storm was closing in on Israel that will damage the economy.
hints of a storm then, and now there are more than just hints that a storm is
coming our way. This explains why Fischer is not in the mood to quietly let the
politicians get away with their deals to raise the budget.