Israel May Pick Bank Head Within Two Weeks, Bennett Says

Israel may appoint a new governor for the Bank of Israel within weeks, following the withdrawal of two candidates to replace Stanley Fischer, Minister of Economy Naftali Bennett said.

A vacuum at the helm of the central bank “is never great,” he said today in an interview with Bloomberg Television. Fischer, former vice chairman of Citigroup Inc. and onetime thesis adviser to Federal Reserve Chairman Ben S. Bernanke at Massachusetts Institute of Technology, left office in June. Fischer’s deputy, Karnit Flug, is now acting governor.

“We’re doing a meticulous job,” Bennett, 41, said, “and that’s why we’re going to have a central banker within a couple of weeks.”

Flug surprised markets on Sept. 23 with a quarter-point reduction in the bank’s benchmark rate to 1 percent, sending the shekel lower for the first week in three. The decision on a successor will be taken by Prime Minister Benjamin Netanyahu in consultation with Finance Minister Yair Lapid and must be approved by the cabinet.

The daily Haaretz reported on Sept. 29 that Netanyahu is looking for new candidates beyond the three currently under consideration.

‘Not Dramatic’

Israel can continue for several months without a central bank chief and weather the embarrassment of losing Netanyahu’s first two nominees, said Alex Zabezhinsky, chief economist of DS Investment House Ltd. in Tel Aviv.

“The credit agencies say it’s not good, but it’s not dramatic,” he said. “We also see uncertainty in the U.S. over Bernanke’s successor” after former Treasury Secretary Lawrence Summers withdrew his name.

The Israeli shekel, which has gained 5.5 percent this year against the dollar, is the biggest gainer among 31 major currencies tracked by Bloomberg.

The Bank of Israel plans to purchase $3.5 billion in 2014 to offset the impact of natural gas production on the balance of payments. It will probably accelerate its foreign currency intervention as economic growth slows to a projected 3.3 percent from 3.5 percent in 2012, Barclays said in a Sept. 29 report. The Bank of Israel expects growth of 3.6 percent this year.

‘Sheep’s Clothing’

Bennett, a frequent critic of Netanyahu though once his top parliamentary aide, said the prime minister was right to excoriate Iranian President Hassan Rouhani at the United Nations this week. Netanyahu called Rouhani a “wolf in sheep’s clothing.”

“Do we hope the diplomatic process will bring the dismantling of Iran’s nuclear project? Yes, we hope so,” Bennett said, adding that the chances of that happening are “very low.”

Bennett, whose computer security company Cyota Inc. was sold in 2005 for $145 million, returned from a trade mission to China two days ago and heads for India next week. “We’re opening up very powerfully to the east,” as Israel seeks to develop export markets beyond its biggest ones in Europe and the U.S, he said. Israel will focus on exporting technology products connected to energy, water, agriculture and food, Bennett said.

Besides leading the Economy Ministry -- previously called the Ministry of Industry, Trade and Labor until he renamed it -- Bennett is also Israel’s minister of religious affairs and minister of Jerusalem and diaspora affairs. He sits in the seven-member Political Security Cabinet with Netanyahu, which determines foreign and defense policy.

Palestinian State

After leading the main lobbying group for Jewish settlers in the West Bank, Bennett ran for parliament as head of the religious party, Jewish Home. His rejection of a two-state solution to the Israeli-Palestinian conflict puts him out of step with Netanyahu, who accepts the establishment of a Palestinian state provided it’s demilitarized and Palestinians recognize Israel as a Jewish state.

“The issue primarily is the security and sovereignty issue which creates many, many problems, which seem right now unsolvable,” Bennett said. “Palestinians currently do govern themselves and that’s the right way to go about it” without recognizing their statehood.

With a plan to annex more than 100 settlements in the West Bank while offering Israeli citizenship to some 60,000 Palestinians, Bennett says a Palestinian state would be “a failed and hostile state to begin with, just like the one we have in Gaza.” He advocates a “massive economic effort to boost the quality of life for Israelis and Palestinians in the region.”

Palestinian President Mahmoud Abbas, whose negotiators started peace talks with Israel in July after a three-year freeze, says all settlements are illegal under international law and should be removed. The United Nations General Assembly recognized Palestine last year as a non-member observer state in a move opposed by the U.S. and Israel.

Before it's here, it's on the Bloomberg Terminal.