Dr. Karnit Flug
Dr. Karnit FlugRonen Sharabi, Bank of Israel

Government officials, MKs, economists, and members of Israel's financial community welcomed the appointment of Karnit Flug as Governor of the Bank of Israel. Flug, who had been the assistant to former BOI head Stanley Fischer and has been acting Governor since he retired last June.

"We were impressed by Dr. Flug's performance as head of the Bank of Israel over the past months, and are certain she will help us march Israel's economy to further achievements in face of the global economic upheaval," Prime Minister Binyamin Netanyahu and Finance Minister Yair Lapid said in a joint statement. The statement heralded a change of direction by Lapid, who told Channel Two several days ago that she was not being considered for the job.

Deputy Prime Minister Silvan Shalom said that “Dr. Flug is the right choice for Governor, and I have no doubt she will strengthen Israel's economy.”

Flug has been with the BOI for 25 years, and is said to have been Fischer's preferred candidate for his replacement. Commenting on the decision, Fischer said that Flug was a “worthy choice. I know it was a difficult decision for the government, but I also know that they were searching for the best candidate. Karnit was a central figure in many important BOI decisions, which makes her very qualified for the job.”

Flug beat several other candidates for the job, including former Argentinian Central Bank head Mario Blejer, former BOI Deputy Governor Zvi Eckstein, and retired Finance Ministry official Victor Medina. Blejer was considered the front-runner for the job, after leading candidate and former BOI head Jacob Frenkel decided to drop out of the running, after he was accused of shoplifting an item from a duty-free store in the Hong Kong airport. Frenkel attributed the incident to a misunderstanding, but decided not to pursue the job anyway.

Also dropping out of the race was Leo Leiderman, Bank Hapoalim's chief economist. He did not give a reason for his decision.

The job was reportedly offered last week to former U.S. Treasury Secretary Lawrence Summers. Who turned it down as well.

Commenting on the appointment, MK Nissan Slomiansky (Bayit Yehudi), chairman of the Knesset Finance Committee, said that he was pleased to see that Flug was appointed.

“I wish her great success on the job,” he said. “This shows that we do not need to shop abroad for economic wisdom, which is available right here in Israel.”