Photo Credit: Wikimedia
Bank of Israel Governor Karnit Flug and Finance Minister Moshe Kahlon

In her letter to Prime Minister Netanyahu Friday, in which she announced she would not be running for another term as on Friday the removal of her candidacy for another term as Governor of the Bank of Israel, Dr. Karnit Flug accused the current government of behaving as if it is about to run for new elections at any moment, which is why it tends to respond to short-term political pressures – and which is why it must have in place an independent central bank that won’t be afraid to present its positions “based on real data and a deep professional foundation.”

The departing bank governor’s main target is Finance Minister Moshe Kahlon (Kulanu), whose circle has recently been threatened to drop Flug as candidate for another term, in light of her criticism of Kahlon’s flagship project – Mechir Lemishtaken housing, which currently has been decimating Israel’s once thriving real estate market.


Flug accuses the Finance Minister of sheer populism: Mechir Lemishtaken costs the public coffers billions of dollars and creates harmful distortions to both the subsidized and free housing market. Kahlon planned to force developers to invest in his Soviet-style program, after effectively taxed the luxury apartment market to death. Most developers preferred to invest in Germany and Canada. Money doesn’t like to be ordered around.

Now, to salvage his reputation, as his party is sinking in the polls, Kahlon, the “social” minister, wants to reduce taxes as part of a shameless election-year pandering, instead of increasing spending on long-term social services, whose outcome won’t necessarily be seen next fall.

But Governor Flug is critical of many other Netanyahu government policies, such as the combination of a very sketchy public transportation system, combined with traffic jams as a result of the state’s inability to keep up with bulging car imports – some 300,000 new cars a year. The state collects about half of the price of each car in taxes, but has not been able to provide a reliable infrastructure in return: not enough roads, and an abysmal bus and train service.

Flug has proposed a congestion fee on private car users, to encourage some of them to stay off the roads during rush hour, to ease traffic jams. She has met the fierce resistance of Transportation minister Yisrael Katz (Likud), who opposes those congestion fees. The last thing Katz wants come next elections is to be associated in the minds of motorists with a tax on their already miserable drive time.

The next Governor will be chosen in the coming weeks, and will take office in November 2018. We trust that the Netanyahu government will make sure to pick an independent professional who will continue to stand in the way of waste and greed.

We’re joking, of course.


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