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UPDATE 2-Israel chief Fischer to step down 2 years early
January 29, 2013 / 2:52 PM / 5 years ago

UPDATE 2-Israel chief Fischer to step down 2 years early

(Adds details, government and analysts’ comments)

By Steven Scheer and Tova Cohen

JERUSALEM, Jan 29 (Reuters) - Bank of Israel Governor Stanley Fischer, widely credited with steering Israel’s economy through the global economic crisis relatively unscathed, will step down two years early at the end of June, the central bank said on Tuesday.

It is unclear who will take over from 69-year-old Fischer, a mentor to Federal Reserve Chairman Ben Bernanke, European Central Bank Governor Mario Draghi and others, and analysts said it would be almost impossible to find a replacement of his stature.

Once chief economist at the World Bank and then first deputy managing director of the International Monetary Fund from 1994 to 2001, Fischer served as vice chairman of Citigroup prior to joining the Bank of Israel. He had sought the top job at the IMF in 2011 but was disqualified due to his age.

His early departure will leave Prime Minister Benjamin Netanyahu, who appointed Fischer in 2005, with another major hole to fill alongside that of finance minister, as he works to build a coalition after last week’s parliamentary election.

The bank gave no reasons for Fischer’s decision, though analysts said the news was not a complete surprise.

“This has been in the air, it’s been out there for quite some time. People have been talking about it, his wife is missing the U.S. and family back home. He even hinted there’s a good chance he wouldn’t finish his term,” said HSBC economist Jonathan Katz.

Katz added that he did not expect any radical shift in Israeli monetary policy after Fischer leaves.

Fischer will hold a news conference on Wednesday at the central bank and will continue to lead the bank until he steps down on June 30, the bank said in a statement.

The shekel weakened briefly after the news came out but recovered to 3.73 per dollar from its fixing of 3.7290. Key Tel Aviv share indexes closed 0.8 to 0.9 percent lower, and government bond prices were down as much as 0.9 percent.

Israeli media speculated that possible candidates to replace Fischer are Avi Ben-Bassat, a former director-general of the Finance Ministry and senior director at the Bank of Israel, and Manuel Trajtenberg, a top Netanyahu economic adviser.

Netanyahu thanked Fischer for his contribution to the Israeli economy in a statement.

“Professor Stanley Fischer played a major role in the economic growth of the State of Israel and in the achievements of the Israeli economy,” the prime minister said.

Finance Minister Yuval Steinitz, who may not be reappointed in the same role in Netanyahu’s new cabinet, said Fischer had raised Israel’s profile on the world stage.

“Stanley became an asset not just for the Israeli economy but also for Israel’s international image, thanks to his standing and his connections in the world,” Steinitz said.


Fischer began a second and final five-year term in 2010 but repeatedly refused to say whether he would serve the full term.

During his tenure, Israel’s economy performed better than most. Despite being hawkish, Fischer slashed interest rates and went against his own policy of staying out of financial markets by buying up tens of billion of dollars to weaken the shekel and help prop up Israel’s export-dependent economy.

He also was known for interest rate moves that often caught the markets off-guard.

“It would not be an exaggeration to assert that Professor Fischer’s leadership at the Bank of Israel gave significant comfort to both domestic and international investors,” said Tevfik Aksoy, an emerging markets economist at Morgan Stanley.

Zambia-born Fischer, once thesis adviser to Fed Chairman Bernanke and a former teacher of ECB chief Draghi, also fought hard for the passage of a new Bank of Israel law in 2010 that led to the creation of a monetary policy committee for interest rate decisions.

He also clashed with the Finance Ministry over the need to maintain responsible fiscal policies, and won international recognition as one of the world’s top central bankers.

Israel, which badly missed its budget deficit target in 2012, needs to close a budget hole of about $4 billion with steep spending cuts, and Fischer is pushing for tax hikes to help the government meet its 2013 target.

Top bankers said Fischer’s leadership would be missed.

“(He) acted with integrity and fairness and from a deep understanding of the needs of the Israeli economy and of the banking system in particular,” Bank Hapoalim Chairman Yair Seroussi and chief executive Zion Kenan said in a joint statement. (Reporting by Steven Scheer and Tova Cohen; Editing by Hugh Lawson)

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