By David Lipkin
Stanley Fischer is set to retire as governor of the Bank of Israel at the end of June.
Fischer, guardian of Israel’s economy, bows out gracefully
He will be remembered as one of the most successful central bank governors of the past decade. Fischer was the senior guardian of the Israeli economy, which he navigated through the choppy waters of the global economic crisis. News of his retirement has fueled speculation that he could run for leadership of the US Federal Reserve in 2014.
Market watchers expect that in the coming weeks Israel’s prime minister Benjamin Netanyahu will try to persuade Fischer to accept a part-time role as a senior consultant of the central bank. Fischer is known among his friends as a man who carefully plans his moves ahead of time. It is believed he wants to return to the US before his 70th birthday at the end of the year in order to find a new job. Fischer and his admirers will do every thing they can to avoid a repeat of his failed attempt to become IMF managing director in 2011 after Dominique Strauss-Kahn was forced to resign. Christine Lagarde, former French finance minister, ended up securing the IMF job.
As the Israeli government seeks a suitable candidate to replace Fischer, he is of the view that they do not need to look far. “There are several very good candidates for this job in Israel,” Fischer said. The three leading candidates to replace him so far are Karnit Flug, deputy governor of the Bank of Israel, who is supported by Fischer; Avi Ben-Bassat, former director-general of the Finance Ministry and senior director at the Bank of Israel; and Manuel Trajtenberg, a former economic adviser to Netanyahu and a Tel-Aviv University economics lecturer.
Getting Fischer, former chief economist at the World Bank and former first deputy managing director of the IMF, to accept the job in Israel in 2005 was a major coup for Netanyahu. Fischer knew Israel well from his work at the IMF and Citibank and even spent time improving his Hebrew.
As governor of the Bank of Israel, Fischer’s main achievements have included maintaining prolonged economic growth, state budgetary discipline and price stability and shielding the country from global recession. He has succeeded in establishing a new Bank of Israel law that created a monetary policy committee for making interest-rate decisions and was also key in the campaign for Israel’s membership in the OECD.
On the other hand, he has failed to rein in housing prices as a result of low interest rates and has not fulfilled his goal to have foreign banks open branches in Tel-Aviv.