Switzerland will contribute CHF10 billion ($10.5 billion) over the next five years to the International Monetary Fund, notably to help tackle Europe’s debt crisis, but parliament has cut the planned amount by a third.
The Senate on Monday followed the House of Representatives in granting the funds aimed at temporarily increasing the IMF’s stock capital by a total of $430 billion.
A clear majority came out in favour of limiting the financial contribution. They argued CHF10 billion was sufficient to prove Switzerland’s reliability.
“We believe there is no need to give the cabinet more funds given the rather strained financial situation and the challenges for balanced public finances,” committee speaker Roland Eberle said.
He said parliament should signal to voters that it is aware of the financial situation.
Opponents, mainly members of the centre-left Social Democratic Party, criticised that the proposed cut was too much if it was merely for domestic reasons.
Both sides ultimately agreed, however, that participation in the extraordinary increase in IMF funds was in Switzerland’s interest, since its economy is closely linked to Europe despite not being a member of the European Union.
The IMF and Switzerland
Swiss voters approved membership in the IMF – and the World Bank – in a nationwide ballot in 1992.
Switzerland has been leading an eight-member IMF constituency currently consisting of Poland, Serbia, former Soviet republics Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan and Turkmenistan.
The group currently has a voting share of 2.8 per cent, to be reduced slightly following a governance reform.
Switzerland and Poland will share the group’s seat on the 24-member IMF executive board.end of infobox
Finance Minister Eveline Widmer-Schlumpf told senators that Switzerland had agreed to an initial contribution in 2004, which was extended in 2009. She said the proposed CHF15 billion over five years agreed upon then were needed to cover risks of currency fluctuation.
A parliamentary decision to limit the Swiss contribution would be a sign of distrust in the cabinet, she said.
In its message to parliament urging support for the IMF funds, the cabinet stressed an escalation of the global crisis could hit some of Switzerland’s key trading partners and that an unstable international currency and finance system could damage Switzerland as a financial hub.
Switzerland had pledged the contribution to the IMF last April, pending parliamentary approval. The House of Representatives last December became the first parliamentary chamber to cut back the Swiss contribution.
Two years ago, parliament agreed to a CHF30 billion contribution to bolster an IMF rescue package for countries in need of an emergency bailout.