Indebted Swiss government to restructure further

In order to prevent further structural deficits, the Swiss government has decided on further cuts KEYSTONE/© KEYSTONE / CHRISTIAN BEUTLER

For the second time in a row, the Swiss government failed to comply with the debt brake in 2023. In order to prevent further structural deficits, it has decided on further cuts for the coming year. In the medium term, all tasks and subsidies will be reviewed.

Last year, the federal government spent more than the debt brake would have allowed, the Federal Council announced on Wednesday. The financing deficit in the ordinary budget totalled around CHF670 million ($755 million). For the second year in a row, it is higher than would have been economically permissible. The structural deficit totalled CHF350 million.

According to provisional figures from the Federal Finance Administration (FFA), net debt rose by CHF1.4 billion and now stands at CHF142 billion. Gross debt according to the Maastricht definition rose by CHF4.4 billion to around CHF128 billion owing to an increase in long-term debt in the form of bonds.

To ensure that the 2025 budget complies with the debt brake, the government had already taken various cutback measures totalling CHF2 billion in January. For example, lower payments into the railway infrastructure fund, a reduction in the federal contribution to the ETH domain and a waiver of the federal contribution to unemployment insurance are planned.

In addition, it has now decided on a linear reduction in low-commitment expenditure totalling CHF350 million. This includes areas such as international cooperation, culture, agriculture, regional passenger transport, the environment, location promotion, the federal government’s own activities and administration. The army is to be excluded.

The latest savings decisions relate to the so-called transfer and own areas. Transfer expenditure includes all federal contributions to third parties, such as cantons, municipalities, institutions and social insurance schemes. According to the government, all of these measures mean that the 2025 budget complies with the debt brake, “provided that no additional expenditure is decided”.

‘Far-reaching measures’ planned

Although the Federal Council intends to continue some of these cost-cutting measures in subsequent years, it expects further deficits in the billions for the years 2026 to 2028. The reasons for this include higher expenditure on old-age pensions, premium reductions, the army and childcare.

Because expenditure on pensions and the army is growing significantly faster than income, the deficits will increase from year to year in the medium term. In addition, expenditure for refugees from Ukraine will no longer be channelled through the extraordinary budget in future. The Federal Council wants to recognise Status S expenditure amounting to CHF150 million in the ordinary budget as early as next year. By 2028 at the latest, all migration expenditure will be channelled through the ordinary budget.

In the medium term, “far-reaching measures” are needed, the government wrote. By the end of March, a concept should be available that fundamentally reviews all federal tasks and subsidies. The review should also include legally committed expenditure and existing funds.

Translated from German by DeepL/ts

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