The Swiss Welfare State Is 'Not About To Be Dismantled'

(MENAFN- Swissinfo) Switzerland needs to revise its“debt brake” mechanism, say guests on our Let's Talk panel. That might help balance the country's budget without having to rely on savings cuts, say economists Marius Brülhart and Nils Soguel. This content was published on June 10, 2025 - 12:28 7 minutes

As a correspondent at the Federal Palace for SWI swissinfo, I report on federal politics for the Swiss Abroad. After studying at the Academy of Journalism and Media at the University of Neuchâtel, my career path initially took me to various regional media, working in the editorial offices of Journal du Jura, Canal 3 and Radio Jura bernois. Since 2015, I have been working in the multilingual editorial department of SWI swissinfo, where I continue to practise my profession with passion.

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The Swiss federal government wants to do some serious belt-tightening in order to maintain a balanced budget. The plan is to save CHF3 billion-4.5 billion ($3.65 billion-5.5 billion) a year from 2027. Climate policy, childcare, scientific research and foreign aid – the cuts will affect just about everything except the armed forces.

+ Expert group proposes CHF4-5 billion in cuts to federal budget

Marius Brülhart, an economics professor at the University of Lausanne, admits there is a need to act.“It is important to have healthy public finances and a balanced budget,” he says. He cautions, however, that there is no easy answer how this should be done.“Should we have budget cuts like the government wants? Should we increase revenue by increasing taxes, or take on more debt? These are political decisions.”

Brülhart favours relaxing the rules on the debt brake, a mechanism adopted by Switzerland in 2003 backed by 85% of voters. This rule provides that total expenses may not exceed the total amount of revenue over the course of an economic cycle.

“Our debt brake is the strictest in the world. And in the legislation that implements it, we have made it even stricter,” Brülhart points out. He regards it as not just a brake, but a“step back from debt”, as it reduces the nation's debt ratio.

+ The Swiss Debt Brake as an international model

Nils Soguel, a professor of public finance at the Graduate School of Public Administration of the University of Lausanne, has a more positive view of the debt brake. In his opinion, it is a key factor behind Switzerland's success.

Thanks to this mechanism, the federal government stands out with its low debt when compared to other countries. It was about 15% in 2023, according to data from the International Monetary FundExternal link (IMF). That's much lower than most other countries.

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“The debt brake is like chocolate and watches, a good export from Switzerland,” insists Soguel. It may limit budget policy, but it still leaves room for manoeuvre in economic ups and downs or crises.

He also thinks, though, that the mechanism has a built-in bias which needs to be corrected.“It was worked out at the end of the 1990s, which were terrible years for public finances. At that time, no-one imagined that the federal government would find itself dealing not with deficits, but systematic surpluses,” he explains.

'A matter of political bargaining'

Both economists believe that the government's programme to curb spending is not likely to curb national growth.“State spending is useful and creates jobs, but raising or lowering expenditures by 1% in any particular area should have no more than a marginal impact,” thinks Soguel.

Brülhart agrees:“It's a matter of political bargaining and distribution of costs and advantages, but one could hardly say that growth in Switzerland will be all that much affected if we do this or that.”

He notes that studies have found that if there is a major budgetary problem, it is better to correct it by means of cuts in expenditures than by raising taxes.“These results don't really apply to the situation here, though, because they are based on budgetary crises that were much more severe than what the federal government is dealing with,” Brülhart points out.

Stereotypical reactions

The federal government's savings programmeExternal link is currently being argued over by politicians, with the ongoing traditional differences between left and right. Those on the right think Switzerland has a problem with its finances, while those on the left think the federal finances are already in good shape.

“The reactions are pretty much stereotypical, but the politicians will have to find a consensus solution. They will have to determine priorities. If there is not enough revenue, some things will have to be given up,” says Soguel.

He points out that the government would not find it easy to withdraw from any existing responsibilities, as centre-right parliamentarians demand. He says the budget cuts proposed in the so-called“Gaillard” reportExternal lin adopted by the government, don't involve completely giving up any responsibility.

More More Swiss finance expert defends austerity measures

This content was published on Sep 9, 2024 The head of the group of experts for the Swiss government's savings proposals sees his work vindicated by the criticism coming from the right and the left.

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