A Fiscal Reformer's Last Hurrah

For Jacob A. Frenkel, it was a high-profile departure. Just before Frenkel stepped down as governor of the Bank of Israel on Jan. 9, Israeli Prime Minister Ehud Barak ducked out of his talks with Syria to nominate a successor. Then Frenkel made news of his own. Three days after he left the central bank, the 56-year-old economist joined Merrill Lynch & Co. in New York, where he will help Chairman and CEO David H. Komansky plot global strategy.

As central bank governor since 1991, Frenkel was a key force in opening--and disciplining--an economy that for decades had suffered from chronic inflation, a bloated state sector, and a dearth of competitive industries. Now, for the first time in years, Israel is showing signs of life--and with no inflationary pressures. Moreover, Barak's choice for Frenkel's successor demonstrates a strong commitment to his free-market policies: Barak has proposed David Klein, Frenkel's tough-minded adviser on monetary policy. "This is a fundamental strategic choice about economic stability," Frenkel says of Barak's decision.