« Groundhog day » for Swiss public finances

Here we go again: the latest data indicate the Swiss Confederation accounts will show a Chf 2.3 billion surplus in 2018, which is 2 billion more than expected. Such positive surprises have been repeating themselves for about a decade now.

Will this « surprise » again go towards paying down the debt without asking deeper questions ? Let’s hope not, as it is about time to update the debt brake rule.

At the risk of repeating myself, let me make some key points.

  • The delicate situation of Swiss public finances in the 1990’s is long past.
  • The debt brake rule must be updated. The patient has long left the emergency room, it is time to adjust the treatment.
  • Swiss Confederation’s debt has substantially decreased and is now very low at a mere 14 percent of GDP. Reducing it further brings no economic gain.
  • Instead the debt could increase by Chf 2 billion per year while remaining steady as a share of GDP – which is the relevant economic yardstick.
  • Investors are craving Swiss debt. The only ask for a 0.04 percent yield to lend at a 10 years horizon, well below inflation.
  • There is a global issue of a shortage of safe assets, such as Swiss government debt. This has been the object of serious analyzes at the global level, as well as for the Swiss case.

It is time to adjust the debt brake. Paying down debt in the current environment is simply a massive waste.

Cédric Tille

Cédric Tille est professeur d'économie à l'Institut des IHEID de Genève depuis 2007. Il a auparavant travaillé pendant neuf ans comme économiste chercheur à la Federal Reserve Bank of New York. Il est spécialiste des questions macroéconomiques, en particulier des politiques monétaires et budgétaires et des dimensions internationales comme les flux financiers.

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