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Financial impact of Covid-19 Who foots the bill for the Swiss coronavirus relief package?

Swiss bank notes in close-up

Money, money, money: The coronavirus pandemic is likely to cause costs of more than CHF60 billion for the Swiss government.

(Keystone/Gaetan Bally)

Funds for an unemployment scheme, loans for cash-strapped companies, financial aid for culture and sport, money to buy hygienic masks – to name just a few new expenses. The coronavirus pandemic is causing considerable costs for the Swiss government.

On top of the Covid-19 related expenditure, the finance ministry is also bracing itself for lower revenue this year, notably from value added tax, withholding tax and direct federal tax.

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Despite considerable uncertainties, Switzerland is well positioned to cope with the financial impact of the crisis.

How much money has the government pledged so far?

So far, the different government ministries have earmarked more than CHF65 billion ($66.8 billion) to cope with the impact of the pandemic according to the Federal Finance Administrationexternal link.

Part of the funds are loans to be refunded.

Finance Minister Ueli Maurer last week estimated that the Swiss government would provide between CHF70 billion and CHF80 billion in financial aid.

In addition, the country’s 26 cantons and local authorities will contribute to the relief efforts.

The figure is comparable to the CHF68 billion the government forked out to rescue the leading bank UBS when it was struggling in the wake of the global financial crisis of 2007-2008.

Another figure might give some more context: Last year, Switzerland Gross Domestic Product (GDP) – a key economic indicator – was CHF698.6 billion.

Experts from the economics ministry forecast that the GDP will plunge by nearly 7% this year.

Can the Swiss government afford to spend such huge sums?

Despite the so-called debt brake mechanism – capping expenditures  – it is possible to spend the necessary funds.

The relatively low debt level and the favourable financial situation give Switzerland enough leeway to run into higher debts, according to the Federal Finance Administration.

Where does the money to finance the relief package come from?

For one: plenty of money is currently available, or as experts put it: there is high liquidity. But the government can also borrow money from other sources, notably the financial market. This in turn comes at a price – namely debts.

An accurate figure will only be available at the end of the year. It is safe to say one thing at this stage, according to the Federal Finance Administration. Debt will increase. Yet it is not possible to give a precise figure as the situation is extremely volatile.

Finance Minister Maurer recently estimated that the federal accounts could drop into the red this year with a deficit of between CHF30 billion and CHF40 billion. This compares to several years with a surplus.

What’s the role of the parliament and do Swiss citizens also have a say?

Parliament is the supreme authority on matters of the national budget. Therefore, it has to approve all additional expenditures. Voters only have the final say in the case of a proposed change in the constitution, and if a legal amendment is challenged to a referendum.

Will taxpayers – citizens, consumers and companies – ultimately have to foot the bill?

At the moment there are no plans to raise taxes, according to federal tax authorities.

The 26 cantons of the country set their own tax levels. 

Why doesn’t the government ask the central bank to print more money?

The role of the Swiss National Bank is not to print money on behalf of the government. The bank is independent, and its policy – defined by law – is aimed at ensuring price stability.

Because of a deal with the finance ministryexternal link, the central bank distributes some of its surplus among the federal authorities and cantons.

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