Israeli Prime Minister Ehud Barak has chosen David Klein, head of the Bank of Israel's monetary division, as successor of outgoing central bank governor Jacob Frenkel, sources in the bank said Friday.

Barak phoned Finance Minister Avraham Shochat to inform him of the appointment from Shepherdstown, West Virginia, where Barak are engaged in the rugged second round of peace talks with Syria.

The nomination will not take effect until next Thursday because it should wait for approval by the Committee for Senior Appointmentas well as cabinet, which can not convene until Barak returns from the United States.

The nomination came after Frenkel agreed Sunday to stay on his job for another week to wait for Barak's choice by the end of this week.

Frenkel, who told Barak about his intention to leave the post last summer, announced his resignation on November 15 last year after eight and a half years in the governor's chair.

Since then, Barak has repeatedly said he wants a governor in Frenkel's image -- an adherent of Frenkel's economic views, and someone capable of standing up to heavy pressure.

Klein, the effective NO.2 in the Bank of Israel, turns out to besuch a person. Indeed, he is widely regarded as taking an even tighter monetary policy than Frenkel, who has been blamed by some analysts for suffocating the newly-born economy recovery in Israel.

Since joining the Bank of Israel in 1987, Klein fully supported the central bank's policy of high interest rates, and if appointed,will undoubtedly lower rates very cautiously. He is also strongly opposed to any intervention in the foreign currency markets.

Because of these financial philosophy reputations, Klein's nomination has triggered not only warm welcome from Frenkel but also some harsh reaction from cabinet and Knesset (Parliament).

Shohat, who preferred to choose more moderate candidates such asTreasury Director-General Avi Ben-Bassat, has not made reaction yetbut he surely does not want Frenkel to be replaced by more hawkish Klein.

Nevertheless, Shochat has already vetoed one of Barak's candidates-- former finance minister Yaakov Ne'eman -- and is therefore likely to be extremely reluctant to veto another one.

Education Minister Yossi Sarid said he expects all ministers of the Meretz party will oppose the nomination, adding Meretz is more interested in a central bank governor who will be less concerned about one percent rise in inflation than one percent rise in unemployment.

Shas's Knesset member David Tal, Chairman of the Knesset labor and welfare committee, called on Barak to reverse his decision, which Tal said will be at the expense of the poorer section of the society, who have suffered extensively from Frenkel's interest rate policies.

Some analysts have warned that a Klein appointment sends a message to the markets that monetary policy will be tighter than ever and market turbulence might be ahead.

But other analysts believe that once in office, the difference between Klein and other candidates will be less dramatic than their policy pronouncement and personal philosophies suggest. (Xinhua)