And a possible return of fiscal dominance could undermine the independence of central banks. Responsibility for financial stability must be shared by the government, the central bank, and other regulators. Although that shared responsibility is not in itself a problem, there are two related concerns.
In the fiscal area, there has been a continued decline in government expenditure as a percentage of GDP since the start of the program led by Prime Minister Sharon and Finance Minister Netanyahu that began in 2003. The rule that determined that expenditures shall not grow by more than 1 percent in real terms is to a large extent responsible for this trend.