Ofer Aderet
April 27, 2011 - 12:00am

Bank of Israel Governor Stanley Fischer told the U.S. Embassy in 2006 that poverty rates have been diminishing despite a report that found that a quarter of Israelis were living below the poverty line, according to a diplomatic cable recently released by WikiLeaks.

Poverty became a subject of political rhetoric before that year's general election, but Fischer said he was "not particularly concerned" about welfare programs proposed by Labor and Likud politicians, adding that "the issue is not poverty per se, but rather the growing social gap between the haves and the have-nots," according to the cable.

Fischer was responding in part to the 2006 poverty report released by the National Insurance Institute, which found that despite overall economic growth, 46,000 Israelis - half of them children - were newly poor, contributing to a total of 1.58 million Israelis who met the criteria for poverty.

Fischer said the Israeli economy was "in good shape, and that, contrary to statements by some politicians, the poverty situation was actually improving," according to the cable from the U.S. Embassy in Tel Aviv to Washington.

He said the poverty data was misleading because income statistics "are incomplete and present a more negative picture than actually exists," especially for Israeli Arabs.

For instance, he said, "they do not take into account the black economy and are adjusted for rents, which understates income for those who own their own homes, as is predominantly the case in the Arab sector."

Assistance with Palestinian banks

According to a separate WikiLeaks cable, Fischer asked the Obama administration to pressure Israel to assist Palestinian banks several years ago.

Fischer asked for the assistance of the U.S. Embassy in Tel Aviv "in putting pressure on key Israeli officials" in an effort to keep the Palestinian banking sector in Gaza from collapsing, according to the cable, which was sent to Washington by Luis Moreno, the deputy U.S. ambassador to Israel.

Fischer's request came on the heels of announcements in late 2007 by Bank Hapoalim and Israel Discount Bank, the only Israeli commercial banks dealing with financial institutions in Gaza, that they would cut their ties with banks in the area over concerns that they would be exposed to legal claims for funding terrorism.

The move followed Israel's designation of Gaza as hostile territory after the Hamas takeover in June 2007.

U.S. government representatives were pressing Fischer to find a solution to the banking impasse, Moreno said in the cable. It said Fischer did not signal that the Bank of Israel intended to pressure the banks but that it was making an effort to force the postal service to provide banking services instead.

Fischer asked for U.S. assistance because the Israeli government was resistant to forcing the postal service to provide those services, according to the cable.

"He said it would be helpful to raise the issue with the Ministry of Finance [MOF] and the Ministry of Communication [MOC], the latter of which is responsible for overseeing the Postal Bank," the cable said.

"Embassy stands ready to press MOF and MOC to 'encourage' the Postal Bank to take up the Gaza banking relationship, if Washington agencies agree that we should do so," Moreno added, referring to the two ministries. He said embassy officials "would call on the ministers or DGs [directors general] at these ministries as soon as possible, provided we got a green light from Washington to do so."


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