The former governor of the Bank of Israel and vice chairman of the US Federal Reserve chatted with us about Israel’s booming economy

How big of a concern is Israel’s rising deficit, and how might it affect the country’s credit rating?

The credit rating matters because it determines the interest rate countries pay. If the government starts introducing bad policies, the debt will be called into question, which is what happened in 1985. [In that year, Israel] needed American assistance to pay its debt. That is not a very nice position to be in. You can restructure the debt, you can do all sorts of things, but you have to deal with it. You can’t pretend that it’s not a problem.

The government is spending less right now due to the political stalemate. Is that good for the deficit?

Wait until you can’t pay for the schoolteachers. I mean, it’s a wonderful argument. Yes, we should reduce the amount of things that government does, then we’ll all be better off because we have more money.

Israel’s Leviathan gas field will start pumping in two to three weeks. Will natural gas make Israel a rich country?

The gas [fields] are a positive thing for Israel, really positive. But it’s not going to change the nature of the economy. Israel will not become Saudi Arabia.

(Originally featured in Mishpacha, Issue 789)