Ronnie Bar-On on Sunday cautioned the government to maintain a responsible fiscal policy as the 2008 budget debate got underway, even as the new Finance Minister relaunched negotiations over increases in public sector salaries, which are expected to cost the government billions of shekels. "The domestic and world financial markets expect us to maintain the policies that support growth, based on fiscal discipline and responsibility," Bar-On said at Sunday's cabinet meeting on the first round of budget 2008 talks. "Sustainable growth will provide essential resources to bring the economy forward and address social problems." Bar-On added that, to boost economic growth, the government needed to maintain a responsible fiscal policy, by lowering debt and maintaining GDP according to the plan approved by the cabinet and one which had made a marked contribution to the success of economic policy to date. "A sustainable growth policy will enable the government to tackle a list of priorities it has set itself, which are investment into education, strengthening underprivileged population sectors and investment into growth-supporting infrastructures," said Bar-On. In addition the Finance Ministry's director general, Yarom Ariav warned the cabinet that the economic growth forecast of 4.2 percent for next year could be at risk if the government exceeded budget guidelines. The 2008 ceiling on deficit spending is set for 1.5% of GDP. The ministry last week forecast economic growth of 4.2% in 2008, down from a projected 5% this year as the strength of the shekel moderates export growth and some companies hit capacity limits. This would be the slowest rate of growth since 2003 when Israel began climbing out of its deepest recession ever. The 2008 budget debate began amid renewed negotiations to raise public sector wages, which commenced over the weekend. In a first meeting of negotiations with the Chairman of the Economic Organizations Shraga Brosh, the Finance Ministry's Budget Supervisor, Eli Cohen warned that the 10 percent public sector wage increase demanded by the Histadrut Labor Federation would cost the government NIS 8 billion in additional budget spending next year and was poised to lead to a wage increase at a cost of billions of shekels for the business sector as a whole.