A serious conflict of opinion has developed between Israel’s two top fiscal officers–Finance Minister Pinhas Sapir and Moshe Zanbar, Governor of the Bank of Israel–over the record national budget Sapir submitted to the Knesset a week ago. Zanbar says it’s inflationary. Sapir denies this and claims that Zanbar himself had a hand in drafting the budget. Observers say the conflict has reached a point where the two “can no longer cooperate.”
Zanbar was Sapir’s top aide in the Finance Ministry before he was named to head Israel’s central reserve bank two years ago. Since then their differences over economic matters have widened to a point where their conflict has reached a personal level, associates of the two men say. This could lead to a serious breakdown of the nation’s economic machinery inasmuch as the Governor of the Bank of Israel serves as economic advisor to the government.
Last week Zanbar warned on a television interview that Israel’s foreign currency reserves would decline to a dangerous low of $850 million in 1974 and urged the government to cut the national budget by IL 1.5 billion. Sapir charged that Zanbar was sowing panic. The Finance Ministry issued a statement noting that Zanbar helped prepare the new budget and had in fact approved the Ministry’s policy of pump-priming–feeding money into the economy that had turned sluggish after the Yom Kippur War. It said that Zanbar’s change of position was “a complete turnabout” and claimed that the drop in foreign currency reserves would not be as sharp as he had predicted.
Zanbar retorted with a statement of his own. “The budget’s framework was prepared two months ago.” he said. “but the Bank of Israel reacted Monday morning. Economic activities and the consumption of goods have returned to normal. We now have to act drastically against inflation and feeding money into the economy is superfluous.”
Some economic officials believe the breach between Zanbar and Sapir is beyond healing and that one of them will have to go if the Bank of Israel and the Treasury are to function smoothly together. Inasmuch as Sapir is a major power with in the government, the feeling here is that Zanbar may soon have to resign.
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