Steinitz to insist on keeping Bank of Israel salaries supervised

Finance Minister Yuval Steinitz says wage supervision of public sector bodies does not infringe independence of institutions.

Yuval Steinitz 88 248 (photo credit: Ariel Jerozolimski)
Yuval Steinitz 88 248
(photo credit: Ariel Jerozolimski)
Finance Minister Yuval Steinitz on Wednesday denied reports that an agreement has been reached which will enable the central bank to set salaries for its employees, without the Treasury playing a role. "Supervision on wages is essential and crucial, and every governmental body is obligated to provide transparency, including the Bank of Israel," Steinitz said at the annual conference of the Finance Ministry's Wage and Labor Relations Department in Jerusalem. "We are conducting intensive discussions on the new Bank of Israel Law, but the prime minister and I have not yet decided on this issue and we are not likely to draw conclusions on it over the coming days." Steinitz commented on reports in the Hebrew press according to which an agreement was developing between Prime Minister Binyamin Netanyahu, Bank of Israel Governor Prof. Stanley Fischer and Eyal Gabbai, the director-general of the Prime Minister's Office, to take away the supervision of central bank salaries from the Finance Ministry. This would make it easier for the Bank of Israel to set salaries for its employees. The bank is in negotiations to include a clause in the draft Bank of Israel Law that would loosen the Treasury's supervision over its salaries. The clause deviates from the provisions of Section 29 (a) of the Budget Foundations Law of 5745-1985, which determines that any alteration or modification in wages of a budgeted body, like the Bank of Israel, is subject to the approval of the finance minister or the ministry's wages director. Finance Ministry officials are vehemently opposed to the withdrawal of the supervision of Bank of Israel salaries, in view of the numerous scandals over excessive wages and benefits at the bank. In addition, the exemption would create a case for other budgeted bodies such as universities to demand a similar status. "Supervision of Bank of Israel salaries does not infringe or threaten the independence of the body," Steinitz said on Wednesday. "We want to advance the new Bank of Israel Law and I am convinced that we will find the most appropriate way to protect the independence of the bank on the one hand and to secure the supervision on central bank salaries." Since taking office in May 2005, Fischer has urged lawmakers to approve the long-awaited Bank of Israel Law so the bank can pursue policy-making similar to other global central banks and maintain its independence. With regard to monetary policy, the governor is currently the sole decision-maker, while the proposed legislation would create a monetary board of governors, as is the case in the US, and is common in Europe. "Despite all reports, there is no attempt to create tension between the prime minister and the Finance Ministry. Our working relations are much better than they seem from the outside and our cooperation with the governor is excellent. I wish relations between every prime minister and finance minister were this good," Steinitz said. "At the end of the day, the prime minister is the captain of the government and the economy. However, the Finance Ministry is and will continue to be the dominant force in the formulation of the state budget and taking a lead in forming economic policy."