Bank of Israel Governor Stanley Fischer made his farewell appearance before the Knesset Finance Committee on Monday, during which he shared his views on more than the economy.
While Fischer looked back on what is universally regarded as a successful term as BOI chairman, he also urged upgrading of the educational system, lowering poverty rates and making peace with the Palestinians.
In a review of his tenure as governor, Fischer said the economy had improved, and downplayed the 40 billion shekel debt crisis. He noted that Israel has brought down its debt-to-GDP ratio from 93.9% in 2005 to 73.1% last year, even as other Western economies piled on debt, brought unemployment down to among the lowest levels in the West, and accumulated a high level of reserves.
Average economic growth was robust high at 4.3%, or 2.5% per capita, especially in comparison with other countries suffering from recession. Inflation remained in the middle of the 1-3% target range.
“Thirty years ago we wouldn’t have believed we could get to this state, but we got to this state,” Fischer told the committee.
Despite the glow of success, however, Fischer outlined nine specific challenges for the country: reducing poverty, improving education, easing red tape on businesses, reducing concentration, increasing productivity, reducing housing prices, adding competition for banks, reducing defense spending and seeking peace.
Addressing the ever-unwieldy bureaucracy, Fischer noted that Israel has slipped from 26th to 38th in the World Bank’s “Doing Business” survey, a development he characterized as “dangerous.”
“We’re dropping not because the situation here is deteriorating, but because in other nations they’re advancing quickly.”
Though the percentage of GDP spent on defense was the lowest in 50 years, having come down from nearly 30% in the early 1970’s to just 6%, Fischer said it was still the greatest drag on the budget each year.
“If there’s no partner, it means you’re not willing to find them,” Fischer said. “We need to work more actively, that is more pro-actively, to bring to an end the conflict that exists in this region.”
“No small part of the answers to the hard questions are related to that,” he said. Even with a reasonable level of debt, Israel pays among the highest risk premiums in the world on its debt because of geo-political instability. “It seems unfair, but that’s the situation”
While Finance Committee members generally praised Fischer’s contribution, he did not entirely escape criticism. Opposition Leader Shelly Yacimovich (Labor) said that the Bank should deal more seriously with economic inequality, not just growth and inflation.
But in the spirit of a friendly parting, she offered with a smile: “Of all the capitalists, you’re my favorite,” she said.