Bank of Israel

today published an opinion it received from the

European Central Bank

, stating that proposed amendments to the Bank of Israel law would contravene European standards.

Coming unambiguously down on the Bank of Israel's side, the opinion will serve the Bank of Israel as a weapon in its fight against the proposed amendments to the law.

Governor David Klein has stated that the amendments would compromise the Israeli central bank's independence.

The ECB stated that maintaining price stability does not have higher priority than other goals, and that defining it as such contravenes European Community requirements regarding the institutional independence of central banks.

The opinion further states that the central bank's institutional independence requires that the central bank be given the tools and means to maintain price stability. The proposed law lacks the provision of such tools and means.

Moreover, the proposal fails to explicitly prevent conflicts of interest, and would allow the member of the proposed monetary council to simultaneously serve in a business or public capacity.

Among other things, the proposal calls for the establishment of a monetary council that would set monetary policy, today the province of the governor alone.

The treasury's proposed changes to the Bank of Israel law have been on the Knesset's agenda for some time, but seem to be in stasis.

Even though the treasury is not admitting as much, it seems to have changed its mind about pushing through the amendments, possibly agreeing with pundits that the moves might exacerbate Israel's economic problems.