French President Nicolas Sarkozy cast a strong vote of confidence in the Israeli economy on Tuesday, while lamenting the lack of active involvement by French companies in the country. "The economic ties between France and Israel are not at a level that they should be. When you look at the trade and business figures, activity is lower than at the end of the 1990s," Sarkozy said at the France-Israel business seminar in Jerusalem on Tuesday, which hosted about 100 of France's top business people. "We have not been enough involved, pushed enough to be part of the economic developments and the wealth of R&D in this country. This situation needs to change. We need to do more to forge cooperations in the business realm as well as with Israeli universities." He added that although some large French companies such as Veolia Environment and Alstom were already active in Israel, there was room for small- and medium-sized companies to expand here. At the same time, Sarkozy encouraged local investors to become active in France. "France is changing, our economy is changing. We are becoming more flexible in our working week and I invite you all to come and invest your capital in France," he said. The governor of the Bank of Israel, Prof. Stanley Fischer, also speaking at the seminar, projected much confidence in the Israeli economy's ability to weather global economic challenges over the next two years. At the same time, though, Fischer expressed concern over the bank's battle to bring rising inflation - now reaching 5.5 percent - back within the government's target range of between 1% and 3%, while tackling short-term effects on growth. "Although our economy in the first quarter of this year has been growing at a much faster pace than we anticipated, there is a significant slowdown in the growth rate compared with the last quarters of 2007, which is the result of things happening abroad," Fischer said. "The real fear here and abroad is not so much a US recession but the outburst of inflation. In terms of monetary policy there is a dilemma over the right dosage at which to tackle inflation while weighing up short-time negative effect on growth and hardships faced by exporters." Last week, the central bank raised its growth estimate for the economy in 2008 to 4.2%, up from the previous forecast of 3.2%, after figures published last month showed that the economy grew at an annualized rate of 5.4% in the first quarter. "Even with an expected slowdown in the growth rate of the economy it is necessary to bring down inflation, and we began to do so last month, raising interest rates by 0.25 percentage points both a month ago and this week," Fischer said. "We will do everything necessary to bring inflation back into the target range of 1%-3%." In an uncharacteristic manner, he commented for the first time on the government's political instability, defending the economic achievements of the current administration. "We are all hearing that we have a weak government, but it managed to maintain strong fiscal discipline," said Fischer. "We estimate that this year's government deficit will be 1% of gross domestic product." The Finance Ministry forecasts a deficit of 1.6% of GDP for 2008. He also said that the sharp appreciation of the shekel against the dollar since the beginning of year was very difficult to tackle, particularly for exporters. "Intervention is possible but past experience has shown that it is not successful," said Fischer. "Our 'problem' is mainly the success of the Israeli economy supporting the strength of the shekel. Many foreign companies are coming here to invest, while at the same time, Israelis have recently started to bring their money back home rather than sending it abroad because of the global financial crisis."