The Governor of the Bank of Israel Stanley Fischer is worried Israel may break its budgetary limits in 2008.
At the Caesarea Forum, held by the Israel Democracy Institute in Haifa. Fischer said:.
"As the government's financial advisor I was sure we were on the right track, so I felt no need to discuss the State's monetary policy over the past two years.
"We showed the monetary discipline imperative to the Israeli market's success," said Fischer, "but our current monetary policy is showing signs of instability, posing doubts as to the government ability to continue on this track.
"That, of course, is undesirable," he added.
The government decided on a 1.7 percent increase for its expenditures, said Fischer.
"It is crucial we stand by this goal, given that the government's expenditures are still relatively high for a western country and that our product-debt ratio is high compared to other OECD (Organization for Economic Cooperation and Development) states."
"Working on the 2008 budget, we see many new government initiatives which may increase these expenditures threefold.
"This increase does not include the predictable addendums of population growth and the public sector's employment agreements," he added.
"Future decisions on the increase in benefits for the elderly and Holocaust survivors, the fortification of communities in the south and so on, compile additional increase in expenditures not only for the 2008 budget, and are by themselves all the extras we can afford to absorb into the budget today."
If the market growth comes to a halt now, added Fischer, the affects may plague Israel for years to come.
"We have no choice but to curb expenditures if we want to retain the market's stability and keep on growing."