The selection of Professor Jacob Frenkel as the next Bank of Israel governor was a worthy and fine choice. He knows the ins and outs of Israel's economy; he is a seasoned professional whose experience on the world stage is vast, as is his grasp of financial and monetary policy on a global scale. Frenkel will now resume his old job, having already served nine years as the top banker in the 1990s, an era that was fraught with economic challenges. As the bank's governor, he felt he had to keep interest rates high. This, he said, was designed to check inflationary pressures that would have otherwise crippled Israel's economy. He zeroed in on job growth, but was cognizant that if inflation was allowed to rear its ugly head, Israel would once again experience the economic nightmare of the mid-1980s. We would all be well advised to recall the turbulence of that time, when inflation reached 400 percent and was well on its way to climb even further. Every month Israelis would descend on banks to withdraw their salary so that it would not depreciate. The entire economy was ridden with tax loopholes that took advantage of the galloping inflation. The economy was defined by one word: instability. Having learned the lessons of that era, Frenkel's self-declared goal upon assuming the governorship in 1991 was to keep inflation at bay. As he went about doing that, he constantly had to withstand pressure from a whole host of interested parties within the business community who were in pursuit of cheap money. But he did not buckle. Many business leaders, as well as senior Finance Ministry officials, wanted to gain political mileage by attacking his economic policy, which was ultimately vindicated. Bank of Israel governors usually have no way of striking back at their opponents. I, for one, have always been appreciative of Frenkel's work, as well as of his dedication and trustworthiness. In a piece I wrote a long time ago, I called Frenkel "the best governor" Israel has ever had. Israel must weather multiple economic challenges. Finding a way to boost growth should be our chief concern. Our 10-year streak of impressive growth may have ended in 2012, but the business sector still has great potential and it could very well stay on the right path. There is an abundance of energy and ambition, particularly in the private sector. For the economy to pick up steam, Frenkel would have to have a rapport with Finance Minister Yair Lapid. The economy is in urgent need of productive teamwork. Frenkel is well-suited for this mission. As governor, he proved that he could be an independent thinker, withstand pressure and even have compassion on social issues. He will be a good partner for the finance minister, and will utilize all the experience he has gained on macro-economic policy. He will also rely on his deep familiarity with micro-economics, which afforded him with hands-on managerial experience. The vast experience he has accumulated, his grasp of economic theory and his personality, are all going to be highly conducive to his work. After he settles in his office, I will allow myself to say that Prime Minister Benjamin Netanyahu found a good governor and that the finance minister found the best partner he could ever have hoped for.
