, there is some logic to this argument, but the question is what level of deficit is sustainable. the current deficit level is, in our assessment, too high to allow for further increase, due to the short - term marcoeconomic risks it entails. in addition, deficit financing creates risks to the quality of project selection and of a loss of control over costs. when public projects are financed without effective short - term budgetary restrictions that show the public and decision makers in real time what the cost of the sources required for the investment is, the risk of inefficient allocation of investments and excessive costs increases. in conclusion, these recommendations illustrate the material possibilities that we are presenting to policy makers to increase the standard of living in israel. i believe that their strength is in their interconnectedness and in their being sufficiently detailed in terms of the cost of realizing each item in the report. their concurrent implementation will maximize the chances of success of the project. the report is available for viewing, and was already presented to the various government ministries as it was being formulated. thank you. 4 / 4 bis central bankers'speeches

stanley fischer : brief review of economic and financial developments in israel in 2006 address by professor stanley fischer, governor of the bank of israel, at the press conference on the publication of the bank of israel 2006 annual report, jerusalem, 11 april 2007. * * * i would like to start by congratulating the team that prepared the report, headed by karnit flug, director of the research department, and michel strawczynski, deputy director of the research department. the team consisted of staff from the research, monetary, and foreign exchange activity departments and the financial stability area. this morning i presented the report to the acting president of israel and speaker of the knesset, ms dahlia itzik ; the prime minister, mr ehud olmert ; and the minister of finance, mr. abraham hirchson. in economic terms 2006 was one of israel's most successful years. this was reflected in the high rate of growth, the decline in unemployment, the improvement in employment, the impressive surplus in the current account, the amount of foreign investment in israel, and price and financial stability. all this took place against the background of rapid global economic growth, but also in a year in which israel was engaged in a war. despite the successes, there are three areas in which, although some progress was made, much work still needs to be done : the relatively high unemployment rate, the large share of public debt in gdp, and the high incidence of poverty. helped by the high rate of growth, however, especially in the last three years, some improvement was evident in all these areas. this drives home the importance of focusing on the main objective of macroeconomic policy – the maintenance of a high rate of growth and converting it into a long - term one. the continued success of israel's economy depends this year too on three main factors : developments in the global economy, over which we have no influence ; ( 2 ) the geopolitical situation, on which we have some effect ; and ( 3 ) the continuation of the government's economic strategy as followed in the last few years, over which we in israel do have control : • current fiscal strategy should persist, mainly the preservation of a low budget deficit, leading to further lowering of the debt / gdp ratio, which despite its reduction is still too high. it is important to avail ourselves of the good years we are currently enjoying to persist in reducing it. reducing the share of debt in gdp would make the economy