Ending Long Impasse, New Bank of Israel Chief Named


The appointment of Karnit Flug as governor of the Bank of Israel on Sunday ended a months-long series of embarrassments to Israeli Prime Minister Binyamin Netanyahu and Finance Minister Yair Lapid, as one nominee after another withdrew their names due to blemishes found in their records, capped by an impasse between the two in the past several weeks over whom to choose.

Flug, the acting governor and her predecessor Stanley Fischer’s personal choice for the job, was passed over repeatedly, apparently regarded as lacking the world-class stature being sought.

Before finally settling for Flug, yet another big name, former U.S. Secretary of the Treasury Larry Summers, was offered the job, but turned it down, Globes revealed on Sunday.

“It’s over,” one of Netanyahu’s aides told Globes on Sunday. Netanyahu and Lapid discussed the governorship last Wednesday, after avoiding the subject for three weeks.

“We have been impressed by Dr. Flug’s performance as acting governor in recent months and we are certain that she will continue to assist us in moving the Israeli economy to additional achievements in the face of the global economic upheaval,” Netanyahu and Lapid said in a joint statement.

Analysts and traders were quick to agree.

Amir Eyal, chairman of the Infinity investment house, said he expects Flug to implement an expansive monetary policy, supporting exports and employment and following Fischer’s footsteps, Reuters reported.

Oren Eldad, head of trading house ATrade, said Flug’s appointment was not likely to have an immediate impact on the exchange rate, which is largely affected by global events. Israel’s foreign currency market is closed on Sundays.

Opposition leader Shelly Yacimovich (Labor) hailed the appointment as “enlightened.”

“Even if the process was faulty and at times ridiculous, Netanyahu needed courage to backtrack from his mistake and correct it, and in the end made the best decision,” Yacimovich said.

“The Israeli economy faces significant challenges,” Flug said in a statement, adding that she looks forward to working with the bank and the government to “meet these challenges.”

Dr. Flug, 58, studied economics at the Hebrew University and earned her doctorate at Columbia University in New York. Most of her career was at the Bank of Israel where she served in senior positions. In the mid 1980’s she was an economist at the International Monetary Fund. She speaks Hebrew, English, Spanish and Polish.

Flug has been the Deputy Governor of the Bank of Israel since July 2011.

Her appointment still needs government approval, a step that is largely procedural and is expected to take a few days. She becomes the first woman to hold the position.

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