Stanley Fischer
Stanley FischerBank of Israel

Tensions between Finance Minister Yuval Steinitz and Bank of Israel Governor Stanley Fischer are reportedly running high over the government's intention to increase deficit spending to 3%.

According to a sources quoted by the Globes financial reporting site, Fischer at a cabinet meeting on Sunday, tried to persuade ministers to vote against Steinitz's plan to raise Israel's deficit ceiling , a plan which has the backing of Prime Minister Benjamin Netanyahu.

"Fischer came with an agenda of his own," a source familiar with the matter told Globes. "He wants a deficit target of 2.5%, and his considerations are purely economic."

"There was tension at the meeting," the source claimed. "And each side tried to pull in its direction. In the end, the finance minister won, and it's no trivial matter to stand up to Stanley Fischer."

The source said Fischer went over Steinitz's head directly to the ministers and said to them "there's no money" and "we mustn't be spendthrift" because "the situation in the world is not good." According to the source "the 0.5% was very material as far as Fischer was concerned."

Steinitz's bureau said after the vote, "We are happy that the minister of finance's proposal was passed by the government by a large majority."

A source close to Fischer told Globes said that relations between him and Netanyahu were "excellent," and claimed that the discussion in the government yesterday was "businesslike" and that "the governor did not get angry."

Netanyahu and Steinitz's decision to raise the deficit target for 2013 was made independently from Fischer, who has publicly opposed the move, saying it is "unacceptable."

Last week, Fischer blasted the Steinitz-Netanyahu plan saying, "There are cynical people who say we cannot handle this right now because there is trouble on the horizon. This is not acceptable."

Fischer added in no uncertain terms, "If we want the lame economy of the late '70s and early '80s, we can continue on the [government's] present course."