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Finance Minister Quits Cabinet over Foreign Currency Reforms

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Israeli Finance Minister Dan Meridor has resigned his post following a showdown with Prime Minister Benjamin Netanyahu over foreign currency reforms.

Meridor submitted his letter of resignation Wednesday after the Cabinet adopted a decision to widen the shekel exchange rate band, a move he staunchly opposed.

He accused Netanyahu, his longtime rival in the Likud Party, of exploiting the issue to push him out of the government.

“There was no reason to bring this issue [to the Cabinet] today,” he told a news conference after the seven-hour meeting. “When it became clear to me that there were ulterior motives for this whole affair, I informed the ministers and the prime minister that I intend to resign from the government.”

Under the new plan, which was adopted by a vote of 8-3, with two abstentions, the band in which the shekel can fluctuate against foreign currencies was widened to about 28 percent. Meridor had said the move could hurt exports and ultimately cause higher unemployment.

As a result of the Cabinet decision, Bank of Israel Governor Jacob Frenkel, who supported widening the band, cut interest rates by 1.2 percent. Frenkel had in recent months refused calls to lower interest rates. He attributed his change of heart to the government decision on foreign currency reforms and indicators showing declining inflation.

Other economic reforms adopted by the government include freeing up foreign currency restrictions to make it easier for Israeli companies and banks to invest in foreign stock markets. This move would also allow Israeli citizens to open foreign currency accounts and take more foreign currency with them when they travel abroad.

Meridor is the second Likud member to quit Netanyahu’s government over policy differences.

In January, Ze’ev “Benny” Begin resigned as science minister in protest over the signing of the Hebron redeployment accord, which handed over about 80 percent of the West Bank town to Palestinian rule.

Commentators noted that Meridor and Netanyahu were longtime rivals in the Likud and that Netanyahu only reluctantly appointed Meridor, who is considered a moderate.

They also noted that Netanyahu was deeply angered by Meridor’s critical remarks when the prime minister was implicated in an influence-peddling scandal surrounding the short-lived appointment of Attorney General Roni Bar-On. They said the High Court’s rejection this week of petitions demanding that Netanyahu be indicted in connection with the Bar-On affair left him confident enough to seek revenge.

National Infrastructure Minister Ariel Sharon was reported to be the leading candidate to replace Meridor. Sharon himself hinted that he had discussed the matter with Netanyahu even before Tuesday night’s Cabinet meeting.

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