Deja vu: Will the Flug farce be repeated?

Bank of Israel head Karmit Flug may be awarded a second term - once again by default.

August 15, 2018 12:02
1 minute read.
Deja vu: Will the Flug farce be repeated?

Karnit Flug . (photo credit: MARC ISRAEL SELLEM)


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(TNS)- Prime Minister Benjamin Netanyahu and Minister of Finance Moshe Kahlon are struggling to find a successor to Karnit Flug as Governor of the Bank of Israel.

The job has reportedly been offered to former Governor Jacob Frenkel, former National Economic Council head Eugene Kandel as well American Jewish economist Prof. Martin Eichenbaum from Northwestern University. All the aforementioned have declined the offer.

Dr. Mario Blejer had been set to meet Netanyahu and Kahlon yesterday and was tipped to be the next Governor. A former Governor of the Central Bank of Argentina and former advisor to the Governor of the Bank of England, a renowned economist, with a BA and MA from the Hebrew University of Jerusalem, he certainly seemed qualified. But among other things, he represents Argentinean Jewish billionaire Elsztain as a director in IDB Development, one of Israel's largest holding companies, thus raising concerns about conflicts of interest.

It is all becoming reminiscent of 2013 when Stanley Fischer stepped down mid-term to return to the US and recommended that he be succeeded by his deputy Karnit Flug. But Netanyahu and then Minister of Finance Yair Lapid did not listen to Fischer. Instead they nominated Jacob Frenkel who later withdrew his candidacy. Netanyahu and Lapid then appointed Tel Aviv University's Prof. Leo Leiderman who subsequently withdrew his candidacy for personal reasons.

Flug was ultimately appointed by default, becoming the first ever woman to serve as Bank of Israel Governor.

Over the past five years, Flug has done her job competently but has alienated Netanyahu and Kahlon by criticizing their economic policies. The Bank of Israel is in essence a non-political job although subject to the appointment of the politicians.

But of course even pure economic theory cannot be divorced from politics. In particular, Flug has been critical of government tax cuts. She feels that Israel's increased tax revenues should be spent on improving the education system to help close widening socio-economic gaps rather than put back into the pockets of voters.

As things stand, it is beginning to look possible, despite her criticisms of Netanyahu and Kahlon, that Flug may be awarded a second term - once again by default.


©2018 the Globes (Tel Aviv, Israel). Distributed by Tribune Content Agency, LLC.

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