Leading economist slams finance minister as irresponsible

Leading economist Professor Haim Ben-Shahar severely criticized Finance Minister Silvan Shalom, who he said is leading an irresponsible political move of the first degree.

Ben-Shahar said this to treasury director general Ohad Marani at a gathering of Economics graduate students of Tel Aviv University over the weekend. The two sat on a panel on the Bank of Israel monetary council law.

Ben-Shahar said that had Shalom been capable of responsibly struggling to attain realistic targets, perhaps Ben-Shahar would have sided with him, but Ben-Shahar doesn't think that Shalom is doing even that. He added that he understands that Marani has to stand by Shalom, in much the same way as Marani supported the economic growth forecast of 4% on which the original 2002 budget was based. Ben-Shahar said he appreciates that Marani is in a bind, but Ben-Shahar feels he is obliged to express his opinion on the subject.

Ben-Shahar said that the Levin commission, of which he was member, worked for a year, and the heads of the ministry and many professionals appeared before the commission. He said that many memorandums were written, many meetings were held, including with international experts and the commission even consulted with U.S. Federal Reserve chief Alan Greenspan. The commission was appointed to recommend amendments to the Bank of Israel Law. Among other things, the commission recommended a monetary council be appointed to advise the Governor of the Bank of Israel on interest rate policy.

Ben-Shahar added that the Levin commission submitted its recommendations in December 1998, and he doesn't understand why no debate took place on those recommendations.

It is important to formulate the law in a way that would ensure the goal of the Bank of Israel will be maintaining price stability, and, should this be possible, taking into account employment and economic growth, Ben-Shahar said. He said that the ministry is focusing on establishing a monetary committee and in defining the objectives of the central bank, but that it's important to pass a comprehensive law that encompasses the totality of the bank's issues, as recommended by the Levin commission.

Marani said that passing the Bank of Israel law doesn't mean settling an account with the governor. Marani explained that the law would have been ratified even if the governor had acted otherwise on interest rates. Marani said there is no Western country where one person determines interest rates.

Minister of Finance Silvan Shalom's amendment to the Bank of Israel Law is awaiting parliamentary approval.