Identifier
Created
Classification
Origin
05TELAVIV3971
2005-06-24 11:15:00
CONFIDENTIAL
Embassy Tel Aviv
Cable title:  

NEW BOI GOVERNOR FISCHER OPTIMISTIC ON ISRAELI

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C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 003971 

SIPDIS

E.O. 12958: DECL: 06/22/2015
TAGS: ECON EFIN IS ECONOMY AND FINANCE GOI INTERNAL
SUBJECT: NEW BOI GOVERNOR FISCHER OPTIMISTIC ON ISRAELI
ECONOMY, PRAISES NETANYAHU AND TEAM

Classified By: ECONOMIC COUNSELOR WILLIAM WEINSTEIN FOR REASONS 1.4 (B,
D)

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 003971

SIPDIS

E.O. 12958: DECL: 06/22/2015
TAGS: ECON EFIN IS ECONOMY AND FINANCE GOI INTERNAL
SUBJECT: NEW BOI GOVERNOR FISCHER OPTIMISTIC ON ISRAELI
ECONOMY, PRAISES NETANYAHU AND TEAM

Classified By: ECONOMIC COUNSELOR WILLIAM WEINSTEIN FOR REASONS 1.4 (B,
D)


1. (C) New BOI Governor Stanley Fischer expressed optimism
about the Israeli economy in a courtesy call by the
Ambassador. Referring to the first-quarter slowdown in GDP
growth, Fischer said he had to be a bit circumspect in his
views. He nonetheless felt the recent drop of unemployment
to 9.1 percent in the first quarter was a significant
indicator of positive economic trends, particularly when
coupled with the fact that firms were generally having an
increased problem finding employees. He admitted that he
wanted more data to flesh out his views, and was asking the
BOI's Research Department to begin collecting data on such
things as the amount of freight being carried on trucks,
gasoline sales, etc.


2. (C) Fischer said one key reason for his longer-term
optimism was Netanyahu's economic policies: "Bibi is the
most serious finance minister Israel has had. He's doing a
great job." Fischer repeatedly referred to Netanyahu's
commitment to a 1% real limit on expenditure growth (Note:
not counting disengagement expenditures),stressing this was
"very tight and impressive." This had led to a significant
fall in government spending as a percent of GDP. Although he
felt the expenditure limit would have to "give way" at some
point, it should be maintained "for the time being." He
noted "Bibi is pushing hard" for the implementation of his
broader economic policies. Fischer strongly supported
Netanyahu's tax cut plan, particularly now that revenues were
coming in significantly above projections. Although he
admitted he was concerned about Israel's high level of
debt-GDP, Fischer did not feel Netanyahu should back off tax
cuts. Fischer also expressed support for Netanyahu's Finance
Ministry team: "I have tremendous respect for the young
people over there."

--------------
Fischer's Priorities
--------------


3. (C) Fischer said he was just getting up to speed on the
various aspects of his responsibilities. He was committed to
forward movement on the Bank of Israel law, and wanted to
create two boards, one for monetary policy and one for Bank
management. The latter, which Fischer referred to as a
"board of directors," would include individuals nominated
both by the BOI and by the GOI, and would count among its
responsibilities the establishment of Bank employee
compensation levels. (Note: The BOI has come under intense
criticism by the Knesset for the purportedly high level of
its employee compensation packages, a criticism the previous
BOI governor was unable to combat effectively. End Note)
Fischer said there was no question regarding maintaining the
Bank's independence under any possible reform plan. Fischer
said he felt the BOI was doing a good job with its bank
supervisory responsibilities: "It's certainly a better system
than that in the U.S,. with its large number of bank
supervisory bodies," he noted.


4. (C) On his role as economic advisor to the Prime
Minister, Fischer said he was not pushing hard to get
involved at this point, "Somebody needs to ask my advice
first." He was still in listening mode and said some of the
best economic insights came from the unlikeliest places,
"When I was here in 1985, Shimon Peres would bend my ear with
his thinking on economic subjects. Yet it was Peres back
then who first said Israel's future is in high tech. He's
amazing." Fischer did not express great interest in playing
a leading role in social policy, although he said he
supported the creation of a negative income tax system for
poorer workers.

--------------
Comment
--------------


5. (C) Fischer's modest appraisal of his role as economic
advisor stands in contrast to that provided in a recent
meeting by Finance Ministry DG Yossi Bachar. During the rough
and tumble economic policy meetings that took place in the
Prime Minister's bureau, Bachar said, "When Fischer speaks in
his very quiet, slow way, everyone falls silent to hear what
he has to say." Bachar said he was waiting for when an
impatient Israeli participant would finally interrupt Fischer
and tell him to get to the point: "It hasn't happened yet,
and somehow I don't expect it to happen soon." Bachar called
Netanyahu and Fischer a "dream team" that worked together
extremely well. He was optimistic their good interpersonal
relationship would lead to a broader and closer cooperation
between the two institutions.

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