Fischer accuses Treasury of salary war

BoI workers among highest paid public employees, with 1/5 earning more than ministers.

Stanley Fishcer 5 88 248 (photo credit: Ariel Jerozolimski)
Stanley Fishcer 5 88 248
(photo credit: Ariel Jerozolimski)
The Treasury is initiating a "war" over disagreements regarding the mechanism for setting central bank salaries as proposed in the new Bank of Israel Law, Bank of Israel Governor Stanley Fischer said Sunday. "At the Bank of Israel, we do not believe that we need to set our own salaries," he said at a press conference in Jerusalem. "It does not appear anywhere in the proposed law. As with public institutions, in our proposal the prime minister needs to have the last word." "Tensions are created between the Bank of Israel and the Finance Ministry since we deal with the same issues in the economy," he added. "It is not acceptable that there is a situation in which the Finance Ministry has this tool [setting the central bank's salaries] in its hands that it can use against us every time we have a disagreement." Fischer said he did not intend to speak about the the proposed Bank of Israel Law until an agreement with the Finance Ministry had been reached, but developments in recent weeks were forcing the central bank to clarify its positions, especially on wages. "The Finance Ministry decided to make our proposal public," Fischer said. "Unfortunately, they don't understand the wage mechanism suggested in the proposal. I did not ask them to start a media war. "It is not acceptable to have a situation in which the two bodies that are responsible for the economy are at war with each other instead of working together. This situation shows that the supervision over salaries needs to be taken out of the oversight of the Finance Ministry as is the practice in many developed countries around the world." Agreement with the Finance Ministry over all issues in the Bank of Israel Law could be reached within three to four hours, he said, except for the wage-supervision dispute, for which the intervention of Prime Minister's Office director-general Eyal Gabbai might be needed. Gabbai has been charged by Prime Minister Binyamin Netanyahu with dealing with the passage of the new Bank of Israel Law. Since taking office in 2005, Fischer has been in favor of a change in the law, which was legislated in 1954, so that the Finance Ministry would no long oversee the central bank's salaries. According to media reports, he has made adoption of the new law a condition for accepting a second term. His term ends next May. "I never take decisions before I have to make them," Fischer said in response to the reports. Under the proposed Bank of Israel Law, a committee will be appointed that will be responsible to make decisions relating to the management of the central bank, including approval of the bank's budget, financial statements, salaries and employment conditions. "The committee will present recommendations and decisions to the government and the Knesset," Fischer said. "The Finance Ministry will be able to appeal the decisions, but if there are disagreements, the prime minister makes the final decision." Bank of Israel employees are among the highest paid public employees, with one-fifth earning more than cabinet ministers, according to a June 2006 Finance Ministry report. Finance Ministry officials are opposed to having supervision of Bank of Israel salaries taken out of their hands, citing past scandals over excessive wages and benefits at the bank. They say the exemption would create a precedent for other budgeted bodies such as universities to demand similar status. Finance Minister Yuval Steinitz said Sunday, before the press conference, it would not be possible to uphold transparency and proper governance in the public sector without uniform and effective supervision of wages, without exception. According to Fischer, the new law would limit the governor's freedom to control interest rates. It would establish a decision-making committee consisting of the governor, the deputy governor, a member of the central bank's management and two external professionals. The governor currently has sole authority to set interest rates.