. blanchard, “ the medium run ”, brookings papers on economic activity, no. 2, 1997, pp. 89 - 141. market. in particular, setting minimum wages at levels which are not in line with productivity reduces the employment chances of less skilled workers and of the unemployed. as seen in germany following unification, the period of adjustment can be painful, but reforms and unit labour cost moderation are finally paying off and they are contributing to robust growth. i remember some observers arguing several years ago that much stronger wage increases were needed in germany for higher growth. the recent evidence does not confirm this view. on the contrary, the increased competitiveness seen in the german economy – thanks to moderate unit labour cost developments – has been an important prerequisite for the very strong job creation observed in recent years. not only in germany, but also in the euro area as a whole, employment growth has been impressive in the eight and a half years since the euro changeover. employment growth amounts to 14. 9 million persons in the euro area, as opposed to only 3. 8 million in the previous eight and a half years. reforms are also needed in product markets. let me first stress the importance of fully completing the single market, particularly in services and network industries. a deeper integration of markets would stimulate price flexibility by fostering competition and open product markets. greater cross - border competition and the integration of markets across the euro area countries would contribute to lower prices. it could also enhance the adjustment processes in the individual countries in the event of asymmetric shocks or differing cyclical developments. it is also important to promote further financial market integration and the development of readily available opportunities for portfolio diversification. this would help to attenuate the impact of country - specific shocks, as i mentioned earlier. national authorities can make a substantial contribution to ensuring the proper functioning of adjustment mechanisms within the euro area by conducting a well - designed fiscal policy. as i have stressed on many occasions, the best contribution fiscal policy can make to the proper functioning of the euro area is by being sustainable and medium - term oriented, fully in line with the orientations of the stability and growth pact. moreover, fiscal policy can and should also focus on increasing the effectiveness and efficiency of the public sector itself through high quality expenditure and tax policies. large and inefficient public sectors are putting a brake on growth by imposing a high tax burden on the economy and channelling resources into unproductive uses. in this

, the government adopted a socioeconomic strategic assessment, and then approved a series of government decisions to adopt directions of action in response to various issues, and to integrate them into the detailed work plans of the ministries, and into their budgets ( decision 145 ). the strategic issues that were defined were : cultivating and maximizing human capital, productivity and competition, financing infrastructure, housing strategy, regional economic development, preparedness for the aging of the population, and “ digital israel ”. an analysis of the performance of all items in the government decisions in the various fields, which was done by the national economic council in the past few months, shows a positive picture in the performance of most of the decisions. these are mainly decisions to create the frameworks and processes, such as establishing teams, presenting and formulating programs, and progress reports to various forums. of course, the most important test will relate to the formulation and implementation of detailed plans, and achieving the targets over time. at this stage, it is too early to assess the extent to which they will be realized. examples of issues that require a strategic plan that were included in the government decision in 2015 human capital — as early as the israel 2028 plan, the area of education and professional training was identified as a main component in providing the basic values and skills required in the modern labor market. this is one of the areas where the importance of a strategic plan is clear — a plan that formulates targets, defines work plans for achieving them, and allocates budgets is essential in order to achieve an education system that is tasked with providing values, abilities and skills that will enable its graduates to deal — as workers and in 2 / 6 bis central bankers'speeches general as citizens — with the challenges of a changing labor world, for many years to come. the low achievements and the gaps in scholastic achievement and in the abilities relevant for the labor market are constantly being raised by the findings of pisa and piaac tests. despite the increase in the average number of years of schooling, literacy, numeracy and functioning in a digital environment among the adult population in israel — at all levels of education — are lower than those in most of the advanced economies, and the situation is no better among students. the need to deal with low abilities and skills is also shown by an analysis of labor productivity trends in israel relative to the other advanced economies, and by productivity and wage gaps between various groups. improvement is needed in the education system and in professional training