JERUSALEM, Israel - Despite some significant drops Thursday in the Tel Aviv Stock Exchange (TASE) indices, Bank of Israel chairman Stanley Fischer said Israel wouldn't consider "massive fiscal expansion."
"There will probably be government intervention in dealing with the credit crisis and decline in credit supply in the economy," Fischer told The Jerusalem Post. "But we will not be able to do what the United States and other industrialized economies are doing in terms of massive fiscal expansion and, fortunately, we don't have to do it. It is not necessary in Israel," he said.
The Bank of Israel governor said that after five strong years of growth, increasing the budget deficit is not in the offing.
"As a result of the very strong fiscal discipline in 2003 onwards, the debt-to-GDP ratio came down from over 100 to 80 percent. This is a huge improvement, but it is still not far enough and explains why we have to be careful in the use of fiscal policy and budgetary spending in dealing with the coming slowdown," Fischer said.
"However, we are in a different situation than other countries, where it has become necessary to implement rescue packages," he said.
"Nonetheless, our government will be watching the situation and looking for ways to make sure that credit is moving to the private sector, in particular to export companies," Fischer said.
Meanwhile, Likud chairman and opposition leader Binyamin Netanyahu, who played a key role in reversing the nation's slumped economy when he served as finance minister in the Sharon government (2003-2005), said fiscal policy was only part of the picture.
In his remarks to participants at the Prime Minister's Conference for Exports and International Cooperation, Netanyahu said Israel must lower unemployment and continue to build the nation's infrastructure.
"We must minimize unemployment and promote growth. At the moment, this is not being done," Netanyahu said. "In particular, in a time of crisis, it is important to lower the level of taxes and invest in infrastructure," he said.
Source: The Jerusalem Post