Flug appointment as BoI Governor receives widespread praise

Opposition leader Yacimovich lauds decision as "enlightened".

Karnit Flug 370 (photo credit: REUTERS/Ronen Zvulun)
Karnit Flug 370
(photo credit: REUTERS/Ronen Zvulun)
News of Karnit Flug's appointment as the head of the Bank of Israel has been well received, with opposition leader Shelly Yacimovich of Labor even hailing the appointment as "enlightened."
Flug has been acting chief since Stanley Fischer stepped down in June, and, despite being Fischer's preferred choice, Prime Minister Binyamin Netanyahu and Finance Minister Yair Lapid struggled through two failed attempts to fill the post before tapping her for the role.
Fischer praised the decision, crediting Flug with helping him make key policy decisions during his tenure at the bank.
“I know it was not an easy decision, but I also know that along the way, the Prime Minister and Finance Minister searched for the most fitting nominee for the good of Israel’s economy,” he said.
"Even if the process was faulty and at times ridiculous, Netanyahu needed courage to backtrack from his mistake and correct it, and in the end made the best decision," Yacimovich said.
Analysts and traders also welcomed Flug's appointment.
Amir Eyal, chairman of the Infinity investment house, said he expects Flug to implement an expansive monetary policy, supporting exports and employment and following Fischer's footsteps.
As governor, Fischer bought billions of dollars to help weaken the shekel.
Oren Eldad, head of trading house ATrade, said Flug's appointment was not likely to have an immediate impact on the exchange rate, which is largely affected by global events. Israel's foreign currency market is closed on Sundays.
"There will be a 'responsible adult' now that can carry out more substantial purchases (of dollars) when speculators try to test the dollar/shekel rate," he said.
Though many economic analysts praised the choice of Flug for the position, not everyone was so forgiving of the drawn-out process that preceded it.
Despite the fact that Fischer gave a five-month warning before he stepped down, Lapid and Netanyahu did not produce their first choice of a successor until his final days in office. That nominee, former BOI Governor Jacob Frenkel, rescinded the offer in July when allegations that he had stolen a garment bag from the Hong Kong airport duty free in 2006 came to the fore. Frenkel denied all wrongdoing, saying the incident was a misunderstanding, but blasted the Israeli media for relentlessly hounding him over the incident.
In August, the second pick, Bank HaPoalim Chief Economist Leo Leiderman changed his mind just two days after accepting the nomination, as stories of his consultations with astrologers and alleged misdeeds during his employment at Deutsche Bank emerged.
After being overlooked for the second time Flug, who was Fischer’s favorite for the position and had garnered the support of prominent MK’s, had announced that she would resign from the bank once a new governor was in place.
Since then, Netanyahu and Lapid decided to vet three candidates at a time, sending them for approval by the Turkel Committee, responsible for approving high-level nominations. Despite the fact that the committee approved the three candidates--Mario Blejer, Tzvi Eckstein, and Victor Medina--in early September, Lapid and Netanyahu could not agree on a final choice. Netanyahu was reportedly persuaded to bring Flug on board after a recent phone call with Fischer.
“Those who opposed Flug’s nomination pointed to her lack of international experience, arguing that it could harm Israel’s economic standing,” said Shmuel Ben-Arieh, Director of local market research at Pioneer Financial. “In my opinion, Israel’s standing was actually harmed more by the Lapid and Netanyahu’s unimaginable zigzagging in the process of picking a governor, during which the natural choice, who was finally chosen, was in front of their faces the whole time.”
Flug’s years of experience at the bank and mentorship from Fischer will doubtless help her navigate the serious challenges the economy faces, such as the taming the price of housing, navigating the still-fragile global economy, and moderating the persistent strengthening of the shekel and its effect on exporters.
“The appointment will prevent shocks at the Bank of Israel and the monetary policy,” said IBI Investment House chief economist Rafi Gozlan, who criticized the “puzzling” four-month period that preceded her nomination. “This is a direct extension of Fischer’s policy, though at this stage there is a greater emphasis on exports, and thus the exchange rates, as opposed to housing.”
Female politicians across the political spectrum overwhelmingly supported Karnit Flug's appointment.
Culture and Sport Minister Limor Livnat congratulated Flug for making "another crack in the glass ceiling," pointing out that Flug filled the position successfully for the last three months.
In addition, three of Israel's five major banks are led by women, which Livnat called "an amazing situation where a major part of the Israeli economy will be guided by women."
"Step by step, one peak after another, slowly slowly, [women] are reaching one goal after another," Livnat said. "It may not happen as quickly as we want, but it's happening, slowly but surely."
Deputy Transportation Minister Tzipi Hotovely said Flug's appointment is a historic milestone on the way to gender equality.
"The disintegration of the gender barrier in business and in banks in Israel created a reality in which women hold key positions in our economy. Dr. Kranit Flug proved that she has the necessary skills for the job and I wish her luck," Hotovely said.
Knesset Committee for the Advancement of the Status of Women chairwoman Aliza Lavie (Yesh Atid) said Flug is "the right person in the right place, and there is no argument about her professional abilities, her rich experience and  suitability for the job, and I am sure she will do it well, as former Bank of Israel governor Stanley Fischer predicted."
"Flug's noble behavior in recent months is inspiring and teaches us an important lesson about reaching our goals and wars of ego," Lavie added.
The Female MKs Caucus called Flug "a role model for women and proof that they can and should reach decision-making positions in Israel."
"It's too bad that in order to appoint a female Bank of Israel Governor there had to be such a long and unnecessary process," MK Merav Michaeli (Labor) said. "I commend the worthy appointment and the end of an embarrassing farce on the way to one of the most important jobs."
Lahav Harkov contributed to this report.