Published On: Tue, Sep 2nd, 2014

Bank of Israel Governor Warns of Budget Problems

File photo of Bank of Israel Deputy Governor Flug speaking during an interview in Jerusalem

Karnit Flug, Governor of the Bank of Israel, addressed the Calcalist newspaper International Conference and warned of budgetary problems.

The European economic crisis of last year and this year’s Operation Protective Edge added more challenges to an Israeli economy that, while healthy, was lacking growth. While the government had a policy of buying up foreign currency to keep the shekel low and to keep interest rates low to help stimulate the economy, government debt has reached a level where higher taxes might be required.

While Flug did not specify which taxes would be increased, she said an increasing deficit would compromise fiscal discipline and spending cuts on an already strained budget were not the best option.

While there are many rays of light in the Israeli economy and the war is slowing down, increase in security concerns, providing for healthcare, education and research are not things that should be compromised, and rising debt is not the best solution, according to her statements.

 

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