Netanyahu Said to Ask Fischer to Serve Second Term

By Alisa Odenheimer

Jan. 7 (Bloomberg) -- Prime Minister Benjamin Netanyahu has told Bank of Israel Governor Stanley Fischer that he would like him to serve a second term, a person familiar with the situation said.

A formal offer will only be made if Fischer agrees to stay on after his term finishes at the end of April, the person, who declined to be identified because a decision hasn’t been made yet, said yesterday. Bank of Israel spokesman Yossi Saadon said that Fischer had no comment, and Netanyahu spokesman Mark Regev said the Prime Minister’s Office would not react to the reports.

Fischer, who has received offers from abroad, wants to stay on and is waiting to see whether parliament passes a new law regulating the central bank, which he strongly supports, the person said. Fischer’s children and grandchildren live abroad and family reasons are also a consideration, the person said.

Fischer, 66, helped steer the economy back to growth amid the worst global recession since World War II. Israel’s economy grew 0.5 percent last year. The economies of the U.S. and the European Union probably contracted 2.7 percent and 4.2 percent respectively last year, according to the International Monetary Fund.

The Bank of Israel will raise its 2010 growth estimate of 2.5 percent, Fischer said this morning at a hoteliers’ conference in Tel Aviv, without specifying the new figure. “The expectations for Israel’s economy are good, while those for the rest of the developed world are not as good,” Fischer said.

Stock Surge

“There is no one that comes close to the man, not in terms of his experience, understanding, confidence or his stature in the international community,” Vered Dar, chief economist at Tel Aviv-based Psagot Investment House, said in a telephone interview.

Israel’s benchmark TA-25 stock index surged 75 percent last year, led by Delek Group Ltd., an energy and real estate company, which rose more than six-fold, and Israel Corp Ltd., a holding company with interests in chemicals and energy, which gained more than 200 percent.

Fischer cut Israel’s benchmark interest rate by half a percentage point to 3.75 percent in October 2008, acting the day before the U.S. Federal Reserve, the Bank of England and the European Central Bank.

Raising Rates

In August 2009, Fischer became the first central bank governor in the world to reverse course in response to signs of a financial recovery when he raised the benchmark a quarter point to 0.75 percent. He has since raised the rate twice more to 1.25 percent.

To help cushion the damage to exports from the crisis, Fischer in March 2008 ordered the Bank of Israel to buy dollars to drive down the value of the shekel. By November 2009, foreign currency reserves more than doubled to $61.55 billion.

In the wake of the rate cuts and dollar purchases, Israel’s economy grew 1.1 percent in the second quarter of last year, snapping six months of recession. Gross domestic product expanded 3 percent in the third quarter.

“Fischer is very well respected and the markets have been happy with the job he’s done,” said Win Thin, a senior currency strategist at New York-based Brown Brothers Harriman & Co. “He cut rates aggressively and he was the first to tighten when the economy showed signs of life.”

Independence

Fischer has said one of his conditions when he accepted the offer for his first term was that Israel amend its law governing the central bank, which dates from 1954. A new draft law would ensure the independence of the central bank, demand transparency and set up a committee to set interest rates. Under the current law, the governor has the sole authority to change rates.

The daily Ma’ariv reported yesterday that Netanyahu is keen for Fischer to stay on, citing unidentified people close to the prime minister.

Fischer became governor of the Bank of Israel and a citizen of the country in 2005 following a career as an academic, international policy maker and a banker in the U.S.

As a professor at the Massachusetts Institute of Technology he was Federal Reserve Chairman Ben S. Bernanke’s adviser on his graduate thesis.

Fischer was first deputy managing director of the International Monetary Fund from 1994 to 2001.

To contact the reporter on this story: Alisa Odenheimer in Jerusalem at aodenheimer@bloomberg.net