Top economist warns of stagnation

Switzerland's pharmaceutical research industry has contributed to the country's economic success Keystone

A senior economics ministry official cautions that the Swiss economy could stall as a result of the February vote to curb immigration from the European Union, especially if key bilateral accords with the EU fall apart.

In a syndicated interview with the Tages-Anzeiger and Der Bund newspapers, Eric Scheidegger, deputy director of the State Secretariat for Economic Affairs (SECO), looked back at the period from 1990 to 1997 when Switzerland’s economy did not grow and unemployment rose to more than 5%. He said that the Swiss economy could not afford to enter another period of zero growth, especially since the world has changed drastically in the past 20 years.

“In an economy with zero growth, the whole society suffers,” he said.

“Zero growth would mean prohibiting companies from investing. That would be a terrible idea.”

Although Scheidegger says the close February 9 immigration vote shouldn’t be “over interpreted” as a referendum on economic growth, he did say that critics of too much growth probably looked to neighbouring countries’ stalled economies, saw Switzerland’s “outstanding” success in comparison, and decided the country should quit while it was ahead.

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“[But] critics of growth forget that zero growth also requires that no more be invested in education,” Scheidegger pointed out. “Educating oneself means saying yes to new things and becoming more powerful. Innovation leads to new business opportunities and creates new companies that try out new products and create new jobs. That’s how Switzerland grows. And, yes, to achieve this, the country needs additional foreign specialists.”

According to industry groups, foreign workers account for about 45% of employees at Swiss pharmaceutical, chemical, and biotechnology companies. And about a quarter of Swiss bank employees are citizens of neighbouring EU countries, according to the Swiss Bankers Association.

In addition, about a quarter of workers in the Swiss health care industry are foreign.

Scheidegger emphasises that foreign workers have not been the only key to success for Switzerland’s economy, but that other factors could be heavily influenced by how negotiations with the EU move forward post-vote.

“The integration into the European market is also important, as well as direct investment in Switzerland and the high proportion of research and development. Today we operate in a highly cross-linked, internationalised business world. I share the concerns of many people who say that it will be challenging to implement the mass immigration initiative without this networked economy being damaged.”

The Swiss cabinet must now re-negotiate existing bilateral agreements with Europe in light of the immigration vote and try to find solutions and replacements for EU programmes that Switzerland was excluded from following the vote.

On March 7, the government announced it was working on finding interim solutions for Swiss researchers and students following the European Union’s decision to suspend Switzerland from participating in the Horizon2020 research programme and the Erasmus+ student exchange.

And following Switzerland’s post-vote decision not to sign a free movement of people agreement with Croatia, a Swiss delegation of senior officials in the education ministry and leaders of federal technical institutes as well as the National Science Foundation have held talks in Zagreb to boost cooperation with Croatia.

On Saturday, former top Swiss diplomat Michael Ambühl emphasised in an interview with the 24 Heures and Tribune de Genève newspapers that the deal with Croatia is the main hurdle to be overcome in finding an immigration solution with the EU in the wake of the vote. He warned it would be very difficult to implement both the free movement of people agreements with the EU and the terms of the approved immigration initiative.

With regard to the Croatia deal that Switzerland chose not to sign, Ambühl said the EU would not allow a country to discriminate against a part of the European population.

But Ambühl said he believes if both parties make an effort, an intelligent solution could be find that took both sides’ concerns into account. Scheidegger is a bit more cautious in his optimism.

“The task now is to implement the referendum and align the immigration quotas with the country’s overall economic interests, as it says in the Constitution,” he said. “That will be a challenge.”