Fischer: Saying there's no partner for peace is unacceptable

"It was a privilege for me to have the opportunity to be the governor of the Bank of Israel. It wasn�t completely obvious to everyone, because I wasn�t an Israeli citizen. My wife and I were glad to be given the extraordinary opportunity. I know of few other examples of such a thing," said outgoing Governor of the Bank of Israel Prof. Stanley Fischer at a farewell event held by the Knesset Finance Committee.

Fischer will leave his post and leave Israel in three weeks. Today was his first farewell event. At least three more events are planned.

"The Bank of Israel's expert team greatly contributed to everything we did. The reason we got through the global crisis relatively well was that the economy's was in good shape at the start of it. In 2007, the budget was balanced and there was a current account surplus. We had a small recession, but of six months, not six years," Fischer said.

Fischer spoke with pride of the growth figures during his term, and said, "Average growth during my time was 4.3%, above the average for the developed countries, and for 2013 the forecast is 3.8%, but since 1% of the growth stems from gas production, the growth figure relevant for employment is just 2.8%. This has already begun to have an effect on the exchange rate, and we are attempting to moderate that. We will see positive effects in 2014, in the form of a fall in costs of energy products."

Contrary to public criticism citing rises in prices and the cost of living, Fischer argued that inflation during his term was actually kept in bounds. "The average inflation rate was 2.5% annually, which is all right," he said, "There was no inflation problem, and average expectations are at 1.8%, meaning that there is no fear of an outbreak of inflation."

On the fiscal deficit, Fischer said, "We managed to reduce the debt to GDP ratio from nearly 100% to 73%. That is a huge achievement, because all the others have only increased their debt. The hope is that we shall succeed in meeting the deficit target of 3% in 2014. We must not let the deficit get out of control, because then we shall have to take painful steps to halt its rise. Everyone says that in the US the deficit is at 7%. By now it is no longer 7%, because they have already started to deal with it, even to their own surprise. Besides that, we are at full employment and they are not. We can't obtain more tax receipts, and they can."

Fischer also revealed his stance on defense spending and the peace process, and did not spare Prime Minister Benjamin Netanyahu from criticism. "The defense budget is a burden on the economy, on the budget, and on our standard of living. It's impossible to spend 7.5% of GDP without affecting the quality of citizens' lives. Spending more money on defense isn't the only solution. We should reach agreements with our neighbors, including the Palestinians. The sentence 'there's no partner for peace' is unacceptable to me. If you say this sentence, it means that you're not prepared to make peace. We have to find the partner. Such a process will contribute greatly to the economy and to the quality of life. Investors don't come to Israel because they are afraid after what they see on television. We must try to change the situation pro-actively," Fischer said.

In response to questions by members of Knesset, Fischer commented for the first time on how the huge deficit in 2013 came about: "There was a problem the government continued to lower taxes but began to increase spending. The Ministry of Finance's growth forecast was around 4%, and that was a reasonable forecast. The problem was that they were over optimistic about tax revenues."

On Israel's balance of payments, Fischer said that there was no longer a problem in this area, as there had been for 40 years. "We have great achievements that are not entirely understood, particularly in the unemployment rate and in the rate of participation in the workforce. Our unemployment is among the lowest in the Western world, but, unlike in 2005, our rate of employment is approaching European levels, and that was one of the great weaknesses of the labor market. There is hope that the rate of employment among the haredim and Arabs will also rise, and perhaps even become high."

Leader of the Opposition Shelly Yachmovich said, addressing Fischer, "I would also have expected to hear from you what happened to housing prices, salary levels, inequality and poverty, which are part of the aims of the Bank of Israel under the new Bank of Israel Law, and to hear about the level of concentration in the economy and the level of bureaucracy."

Nevertheless, Yachmovich described Fischer as "the leader of the Israeli economy" and said, "Of all the capitalists, you are my favorite."

Fischer admitted that "there has been little change in the level of poverty almost a quarter of the population, according to the OECD; the level of inequality is among the highest in the world."

Published by Globes [online], Israel business news - www.globes-online.com - on June 3, 2013

Fischer: Saying there's no partner for peace is unacceptable

Stanley Fischer told a farewell event held by the Finance Committee that defense spending was a burden on the economy and that Israel needed to make peace.