Bank of Israel head challenges differential interest rates

Fischer urges euro bloc to keep rates uniform across entire zone

By RAN DAGONI/ GLOBES
Stanley Fischer 311 (photo credit: Bloomberg)
Stanley Fischer 311
(photo credit: Bloomberg)
WASHINGTON – Bank of Israel Governor Stanley Fischer believes that it is unwise to have different interest rates within the eurozone, despite the large gaps between strong and weak countries such as Germany and Greece. Speaking at the World Bank and IMF Annual and Spring Meeting in Washington, Fischer’s remarks challenged proposals to institute differential interest rates in the eurozone.
On Friday, Fischer met with US Treasury Secretary Timothy Geithner to discuss the Bank of Israel’s efforts to slow the appreciation of the shekel, and the US deficit.
At the Annual Meeting’s panel, Fischer expressed his confidence in the euro, despite the chronic debt problems of some secondtier EU member states, such as Greece and Portugal. “The euro will survive,” he said.
Fischer said that the European Central Bank should continue to manage a uniform interest rate policy for all eurozone countries, because its decisions are based on figures for the eurozone as a whole. Weak states would not be harmed because they can rely on extensive credit provided by all eurozone countries.
Fischer also expressed concern about the effects of slow US economic growth on the global economy. “It’s very nice to talk about the rise of China, but financial markets are a completely different matter. From this perspective, the US is the essential country for the global market, so there is reason for concern,” he said. “The question of whether the US can sort itself out at home worries us. It’s impossible to constantly have the huge deficits that we have seen in the past two years."