continued decline of public debt as a share of gdp – the opposite of the trend in most advanced economies and of the average level in those economies. the interest burden on the public debt remains high compared to the oecd bis central bankers ’ speeches average, but is in a downward trend that was accelerated in the past two years. the reduction of the interest burden, from about 4. 5 percent of gdp in 2010 to about 2. 5 percent of gdp today, frees up significant sources – about nis 20 billion per year – for other uses. it is therefore important to maintain this trend. the bank of israel ’ s first assessments regarding 2017 indicate that the automatic pilot for expenditures, meaning the increase in expenditures required as a result of government commitments and expected demographic developments, is nis 14 billion higher than the expenditure ceiling – similar to the ministry of finance ’ s estimate that was published this week. should the government make the necessary adjustments to meet the expenditure ceiling, then according to initial forecasts of tax receipts, the government is expected to meet the deficit target of 2. 5 percent of gdp. the government will need to choose between cutting expenditure, which will make it difficult to achieve the long - term goals i will detail later, and increasing tax revenue, whether through the cancellation of exemptions or through raising tax rates. success in dealing with the short - term challenges, and the fact that the economy is in a reasonable state relative to the global environment, make it possible to increase efforts to narrow the gaps in a series of issues between us and the other advanced economies, and to lay the economic groundwork for the future. it is important for the government to formulate a set of priorities that will enable it to focus on dealing with the fundamental problems in the economy and israeli society in the long term. how? economic policy to achieve long - term goals – inclusive and sustainable growth – acts by providing public services at a proper level, supporting growth engines in the economy, using policy tools to narrow gaps, reforms to increase efficiency in the use of infrastructure and public services, and increased competition in industries where it is not sufficient. what are the challenges facing policy makers in the long term? a forward - looking view shows that there are processes, some global and some domestic, working as headwinds to growth : according to an analysis by international organizations, the growth rate of global gdp is expected to be more moderate in the next few years than prior to the global financial crisis, and the growth

implying that not only demand, but also supply of the short maturity bonds will be reduced, and possibly sharply so. at some stage the public discussion of these issues ran out of proportion with the limited magnitude of these effects. now, increasingly, investors and observers understand and acknowledge that the new law is a credit - positive event – complementing the existing safeguards and track - record of the mortgage system. banking union finally, to the issue of banking union. preparation by the ecb for the single supervisory mechanism is well advanced. regarding the single resolution mechanism ( srm ) and the setup of a sector - financed joint resolution fund, the window for reaching a final compromise between the co - legislators, the council and the european parliament, is closing fast due to the coming ep elections. still, it should be in the interest of all parties to reach a compromise solution. i believe and hope that it will be done. bis central bankers ’ speeches the banking union is a major change in the european financial regulatory framework. and the impact will be felt widely in eu countries, whether they participate in the union or choose not to. danmarks nationalbank finds that it would be to the advantage of denmark to join. yes, the trigger event for leaders deciding to launch negotiations on a banking union construction was the sovereign debt crisis in a number of euro area countries combined with the weak banks and the interaction between banks and the sovereign. but the broader reasons for banking union were around even before the financial crisis. key are the need for a level playing field in the single market for financial services, the need for a comprehensive framework for crisis - management of cross - border banks, and the need for better and more harmonized supervision. one may argue, and i do, that banking union is more of a single market issue than a single currency issue, while acknowledging that it is both. we need more competition in financial services and therefore more activities across borders. the reversal of cross - border financing activities since the financial crisis is not helpful. supervision by the ecb can better ensure a level playing field in terms of supervisory practices. it can enhance the quality and credibility of supervision by adding external eyes to work done by national supervisors – excellent as it may often be. the practice set by the ecb is in any case likely to establish an eu wide benchmark for supervisory standards. a level playing field needs a strong single resolution mechanism which can effectively apply and implement bail - in. note that the requirement of an 8 per cent