stanley fischer : education, ‘ aliya, and the young generation in israel remarks by professor stanley fischer, governor of the bank of israel, at the 2007 hias scholarship award ceremony, jerusalem, 28 december 2007. * * * mr. neil grungras, director general of hias israel, europe, and the middle east ; mr. danny adamaso, director general of the israel association for ethiopian jews ; hias referees ; hias staff members and volunteers ; students ; and esteemed guests : it is a great honor for me to be here with you at the 2007 hias scholarship award ceremony. this event concerns itself with three domains that i consider very important for the future of the state of israel and its society : education, ‘ aliya, and the young generation. it ’ s also a very important day for you personally – you are at the beginning of your path to higher education and independent life. the topic of education is very important in israel, since the country is almost totally lacking in natural resources apart from human capital. and human capital is a natural resource that has to be developed constantly, in order to maintain and widen israel ’ s qualitative edge. for many years, israel placed a great deal of emphasis on education. i ’ ll illustrate this with three examples from international comparisons in education that were performed in 2005 : a. 46 percent of israelis aged 25 – 64 had post - secondary schooling, as against 26 percent on average in the oecd countries. b. r & d expenditure in israel was 4. 4 percent of gdp, as against 2 percent on average in the oecd countries. c. per - pupil government expenditure relative to per - capita gdp was similar in israel to the oecd average at the prekindergarten and secondary levels of education and surpassed the oecd average at the primary and higher - education levels. this favorable picture, however, stands in stark contrast to the relatively poor achievements of israel ’ s student relative to other countries, for example, in the sciences, according to the oecd ’ s pisa exams. thus, the government in israel is relatively lavish in its education spending but the country ’ s students are not achieving well. this state of affairs leads us to one conclusion : israel ’ s education system is inefficient. there are several possible reasons for this : a. israel does not have one education system but at least four separate systems – some of which do not impart

itself is lower than it was in 2003, although the cyclically adjusted deficit is close to 4 percent – higher than it was in 2003. since 2007, when the actual deficit was almost zero, the deficit has grown during the crisis, declined somewhat in 2010, and since then has not declined. the result is that we have a deficit of about 4 percent in a situation of almost full employment. i feel very uneasy with this kind of deficit in the current situation, since if the economy enters a recession – a scenario which we must take into account – the deficit will grow, and it will be harder to deal with it. the debt - to - gdp ratio declined from a level of almost 300 percent of gdp prior to the stabilization plan, climbed slightly to a level of about 100 percent during the recession at the beginning of the 2000s, and continued to decline since then to a level of 74 percent today. compared to other countries, we have greatly improved in this parameter due to an increase in the debt levels of many countries as a result of the crisis, but it is very important for the state of israel that the debt to gdp ratio be low. we are exposed much more than other countries to geopolitical risks, and if god forbid we find ourselves one day in a conflict with our neighbors, near or far, it is important that we not come into it with this kind of debt ratio. it is very important, therefore, to continue reducing the debt to gdp ratio. in 2012, the government adjusted the deficit path such that the deficit targets would be reduced more slowly than planned beforehand. in practice, if we grow at an average rate of bis central bankers ’ speeches 3. 75 percent per year, the deficit will decline even more slowly than the path decided upon by the government, based on the existing tax rates in the existing legislation – that is, even taking into account the increase in the vat and direct tax rates recently enacted. according to this estimation by the bank of israel, the deficit in the coming year will apparently be 3. 5 percent, and will reach a level of 2 percent only in the year 2020. according to this projection, debt will also decline more slowly than the government estimated when setting the legislation. the fiscal rule which guides our actions is the result of a joint effort by the ministry of finance, the prime minister ’ s office, and the bank of israel. it is a relatively simple rule that can be easily explained to the public. we know that the expenses