Jun 2, 5:45 AM EDT

Israeli bank chief says growing numbers of ultra-Orthodox Jews and Arabs could hinder growth

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JERUSALEM (AP) -- Israel's central bank chief said Monday that demographic changes such as aging and the growth of Arab and ultra-Orthodox Jewish populations were threatening the country's long-term growth prospects and called for a continued increase in their employment.

Karnit Flug said the low employment rate among ultra-Orthodox men and Arab women in particular was hindering growth and while both segments were showing increased employment, without a drastic change Israel would suffer compared to other developed nations.

Arabs make up about 20 percent of Israel's 8 million citizens. The ultra-Orthodox are about 10 percent. Both are among the fastest-growing segments of society. The bank's demographic forecast predicts that within 50 years, Israel's non-ultra-Orthodox Jewish population will drop from the 70 percent to just 50 percent.

Ultra-Orthodox men often avoid the workforce and collect welfare stipends while continuing to study religion full time. Due to its high birthrates and unemployment, the ultra-Orthodox community is among the poorest in Israel. Ultra-Orthodox leaders insist their young men serve the nation through prayer and study, thus preserving Jewish learning and heritage. They say outside forces are putting their ancient brand of Judaism under siege and that integration into the secular military and workforce will undermine their lifestyle.

The previous government passed landmark legislation that aimed to gradually incorporate the ultra-Orthodox into the military and boost their employment figures. Now, with the insular ultra-Orthodox parties back in government, they are determined to roll back those measures.

Arabs, meanwhile, complain of poor education systems and lack of employment opportunities compared to Israeli Jews.

A separate Finance Ministry report warns that these trends could lead Israel toward Greece-style bankruptcy. The report says that if Israel fails to integrate the ultra-Orthodox and Arabs into the workforce, government revenues will increasingly lag behind spending as tax revenues shrink.

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