forcing the adjustment through all wages and prices can be steep. worse still, if that adjustment is also hampered by capital controls, external imbalances are likely to persist and build. and if, as a result, the currency peg becomes unsustainable, the country is likely to face an abrupt adjustment, and the effects are often felt by the entire system. vision and agenda for the 21st century as we consider these challenges together, the right balance is crucial. we need a vision for the international monetary and financial system of the 21st century in which emes will form an increasing share of the global economy, while gradually developing their financial systems. this vision for the long run cannot merely focus on a utopian system where all participants have mature, well - regulated financial systems, fully open capital accounts and exchange rates that are freely floating. we must also be mindful that some are closer to the destination than others. in discussing this vision, i want to focus on three priorities : the need to find balance between short - run policies and long - run progress, the value of a framework for currency intervention, and the need for global cooperation and resources. over the past decade, the focus has been on widening the set of policies countries use to deal with temporary external shocks. this is welcome and is reflected in the imf ’ s institutional view. but there has not been enough attention to ensuring that these policies do not impede longer - run progress. many emes seem to be settling for intermediate exchange rate regimes with more or less regular foreign exchange interventions. this risks slowing needed structural adjustments in the real economy. it also risks exacerbating the very pressures these short - run tools seek to manage. by thwarting adjustment, they can cause pressures to build up, leading to greater volatility. finding balance means allowing countries to respond to excess volatility or disruptions in the short run while making the system flexible enough to adjust in the long run. progress has been made in the imf ’ s institutional view, which supports the use of macroprudential policy to manage financial stability risks. and only if macroprudential measures are insufficient, should capital flow management be considered. but more work is required to understand the implication of short - run policies for longer - run financial development. currency intervention needs attention as well. a freely floating currency may not provide as much benefit to some emes as once thought. dominant currency pricing reduces the benefits of exchange rate adjustment for some countries

per child in compulsory and tertiary education as a share of gdp is not low by oecd standards, and in some cases is higher. but when we see the decline in pupil achievement over the years, compared to other countries, then we must conclude that the israeli education system is not effective. to improve the situation, it is important that we examine the reasons for this ineffectiveness and that we act to put it right. why? because we are referring to our most important investment, the investment in our young, who are our future source of labor, enterprise and growth. in the field of higher education too there is room for special concern. it is sufficient to see the lists of israelis on the faculties of the leading universities of the us and other countries. this is a difficult situation to accept. the shochat committee, which reported earlier this year, has done sterling work on advancing higher education in israel and it is important that its recommendations be implemented, including granting wage differentials in order to reward the best academic staffers. another area that has been neglected in recent years is that of technological education. i hear this from various sources : in the educational system, and from industrialists who need individuals with technological qualifications. this is also a field that needs cultivating and promoting. as is well known, education is the best way of reducing poverty in the long run. and this leads me onto the next topic, that of welfare. b. welfare a very important way of alleviating poverty is by integrating those who can work into the field of employment, and at the same time raising the compensation that poorly paid people receive. in this context i am delighted that the subject of earned income tax credits is on the government's socioeconomic agenda and i hope that it will be implemented soon, along with the other subjects found on this important agenda. i will not elaborate today on the ways to integrate the poor into employment and to support those who cannot work. rather, i would like to refer to the topic of the composition of israeli society. according to data from the central bureau of statistics, most of the poor in israel are concentrated in two sectors : the ultra - orthodox and the arab. while the incidence of poverty among the non - ultra - orthodox jewish population was only 12 percent in 2006, the incidence of poverty among the ultra - orthodox and arabs was 57 percent and 58 percent respectively. this is connected to the low rates of employment in these two sectors, particularly among ultra - orthodox men