* Leiderman cites privacy concerns in dropping out
* Prime minister seeks third candidate for vacant spot
(Adds Bank of Israel spokesman on Flug's status, paragraph 12)
By Ori Lewis
JERUSALEM, Aug 2 In an embarrassment for Israel,
Leo Leiderman announced on Friday that he was withdrawing his
candidacy to become the next governor of its central bank, the
second nominee to pull out within less than a week.
Leiderman, chief economist at Bank Hapoalim, told
Prime Minister Benjamin Netanyahu that he did not want the glare
of publicity that came with the leading role at the Bank of
"After holding intensive discussions with his family over
the past two days, he has decided that he would prefer to
continue to work as a private person at Tel Aviv University and
at Bank Hapoalim," said a statement released on Leiderman's
Netanyahu put forward Leiderman's name on Wednesday after
the nominee for the vacant position, Jacob Frenkel, dropped out
denouncing a "witch hunt" over media reports of a suspected
shoplifting incident in Hong Kong in 2006. No charges were ever
filed and Frenkel said it had all been a misunderstanding.
Netanyahu has had months to find a replacement for the
highly regarded Stanley Fischer, who announced in January that
he would step down at the end of June, two years early after
spending eight years in the job.
Leiderman's announcement came just ahead of the Sabbath in
Israel and all markets were closed. Analysts said Israel's
monetary policy was on a steady course but urged a swift
solution to the problem.
"It's a setback. It really heightens uncertainty," said
Daniel Hewitt, emerging markets economist at Barclays Capital.
"Now, we don't know what's going to happen with monetary policy
in the near term."
Leiderman's decision to stand aside represented a remarkable
turnaround. Just a day earlier, the Argentine-born economics
professor had told Israel's top-selling daily, Yedioth Ahronoth,
that he was ready for the job.
"Give me a hundred days of grace and then you will see that
we will start to see results," Leiderman told the newspaper.
Leiderman's appointment had drawn the attention of Israel's
Channel 10, which said he had regularly used to consult an
astrologer. The television station quoted him as saying that the
consultations were only for "personal and family matters."
The previous front runner for the position, Deputy Bank of
Israel Governor and acting central bank chief Karnit Flug who
was passed over for the job, quit on Wednesday but a spokesman
said she would remain in charge until a new governor is named.
"Flug will remain acting governor until a permanent governor
takes office," Bank of Israel assistant spokesman Yoav Soffer
The head of the main Labour opposition party Shelly
Yachimovich had criticised the decision to nominate Leiderman,
suggesting that Flug had been ignored because she was a woman.
Hewitt said Flug remained the best candidate.
"They should have gone with Flug in the first place," he
said. "I really hope she reverses her decision."
Jonathan Katz, a Jerusalem-based economist, also said Flug
should do the job, adding that financial markets had liked
Fischer's policies and would expect her to continue in the same
"She may cancel her decision to stand down that now that she
appears to be the main candidate ... after 25 years' experience,
a number of them as Fischer's deputy, the markets would be
fairly pleased to have her in the job," he said.
Flug was not immediately available for comment.
(Additional reporting by Steven Scheer; Editing by Crispian