It is generally accepted that Israel will be burdened by a general election in the first quarter of 2019. Thus, the top ministers of the various partners of the coalition are rushing to give interviews as to how much they have done for their supporters and how their policies have made these groups better off.

And yes, the politicians and bureaucrats in Jerusalem have been doing a reasonable job. For example, the rating agency, Standard & Poor, raised its grading of Israel to AA- this summer.

But, I have been very concerned just recently. The Finance Minister, Moshe Kahlon, an opponent of the Prime Minister and one of the shrewdest players on the political court, is advocating 90% mortgages for young, first-time buyers. In other words, on the 10th anniversary of the global credit crisis, Kahlon is rejecting one of the most key lessons learnt from the financial meltdown.

Significantly, Kahlon has had more than his fair share of arguments with the Governor of the Bank of Israel, Mrs. Carmit Flug. A few months ago, Flug realised that her tenure would not receive an ‘automatic renewal’ for a second term, and so she announced her resignation.

Flug’s deputy, Dr. Nadine Bodo-Trachtenberg, gave an interview to “The Marker” newspaper in Hebrew last week. Yes, she complained that she has not been considered for the top job, despite what she sees as he excellent pedigree. And she appreciates that she is as ‘marked’ as a supporter of her immediate boss. That said, Bodo-Trachtenberg clarifies issues that Kahlon would not necessarily want others to here.

First, Israel was extremely well prepared to meet the crisis of 2008. Banks were not exposed and the Minister of Finance at the time refused to budge to the needs of interest groups.

However, in 2018, the threat is external. Israel’s balance of trade has improved significantly by building up strong relationships with the likes of China, Brazil, the UK. Each of these countries and others are now facing the threat of an economic slowdown. This shift will probably impact adversely on Israel. Bodo-Trachtenberg argues that Israel should not continue in a vacuum, unprepared for the worst.

Second, compared to other countries, Israel has brought down its GDP-to-debt ratio from around 80% to 55% since the year 2000. The OECD average stands at about 100%. Above 120% or so, and you end being compared to former basket-cases like Greece and Ireland. The problem is that the populist demands for monies from the coalition partners in the Israeli government, combined with the necessary demands of the defense sector and the Prime Minister’s weak position in the Kenesset, means that the success of debt reduction is under threat.

And when that is at risk, Standard & Poor could revise their estimates back downwards. This in turn would make it more difficult and more expensive for the country to raise money on the international money markets.

I have no idea who will replace Flug. I do know that the best central banks in history are able to maintain their independence from the grubby hands of politicians. Israel needs that protection just as much as anyone other country. Let us hope that Kahlon and Netanyahu have the skill and courage to maintain their distance from one of the key elements of any civil society.