Bank of Israel Governor Prof. Stanley Fischer warned Monday against irresponsible political campaign promises to guarantee the worth of pension funds and backed the limited plan of Finance Minister Ronnie Bar-On (Kadima).
He was careful not to criticize an alternative financial package plan presented by outgoing Prime Minister Ehud Olmert, who has locked horns with Bar-On in an unusual public display of opposition to a senior minister. Fischer praised the Prime Minister's idea but sided with Minister Bar-On's program.
The core issue is the worth of pension funds, whose net value has dropped by approximately 10 percent the past year after having appreciated by about the same amount annually for the past five years during the stock market run-up.
Histadrut union leader Ofir Eini threatened a general strike over Bar-On's $5 billion stimulus plan because it did not provide a "safety net" for pension funds. Stung by across-the-board criticism, Bar-On offered a smaller plan that included a security net for funds of workers aged 60 and over and who have pension funds.
Prime Minister Ehud Olmert said that was not enough and enraged Treasury officials by coming up with his own ideas.
Fischer commented Monday morning, "We all know that with an election in the offing, these are exceptional times…. The biggest danger in the safety net plan is that everyone will rush to be generous and expand it. This will increase the cost and we and future generations will pay a heavy price."
He praised Olmert's plan as costing the same amount of money and addressing a wider population but concluded that Bar-On's proposal is "fair and addresses the needs of those savers who could be harmed by the crisis."
Senior officials at the Finance Ministry, including the budget director and the commissioner of capital markets, sent a letter to the office of the Prime Minister accusing Olmert and his aides of overstepping their legal authority on issues that are in the ministry's realm of responsibility.
The dispute overflowed into the Knesset Monday morning, where Labor Knesset Member Prof. Avishai Braverman broke up a legislative Finance Committee session by demanding that Bar-On thoroughly explain his whole plan. The minister said he intended to present only two of the parts of the proposal, prompting MK Braverman to put an end to the meeting and squash plans for a vote.