Israel’s economic progress, despite a global recession, has been well documented and described. The economy is expected to grow at 4% in 2010 for all the hangover of the credit crunch and troubles in key European export markets.

And there will be exciting times ahead. The impact of revenues from new energy resources will be enormous. Infrastructure projects like the education, transportation and health budgets can expect a major boost over the forthcoming decade.

But, and there is always a but, nothing is perfect. Stanley Fischer, Governor of the Bank of Israel, has declared war on the housing market. With increasing noise over the past year, his team has let it be known that they are not prepared to see real estate prices rise and rise and rise.

To date, the preferred weapon of attack has been the rate of interest. They have just been raised to 2%, and further changes are in the pipeline.

The downside has been the effect of the shekel, which has strenthened significantly against the US dollar and other countries. All this means that exporters are suffering. Profits levels are under threat.  

Fischer knows that the stakes are high. In parallel, he has publicly announced that he will continue to buy dollars on the open market. After all, exports make up 40% of Israel’s economic activity.

Anybody understand why the Israeli government cannot release land for new housing, which would quickly rectify the situation?