Government unveils new round of spending cuts

The government wants to cut an additional SFr2 billion Keystone Archive

The Swiss government wants to cut the federal budget by an additional SFr2 billion ($1.73 billion) from 2006-2008.

The latest savings plan will result in further cuts to public spending, but the package still has to be approved by parliament.

Last year parliament approved a government proposal for cuts of SFr3 billion. Now the government has requested additional savings of SFr2 billion until 2008.

It says the aim of the latest round of spending cuts is to reduce the federal deficit.

The government says that if the latest package is approved, there will be a deficit of SFr800 million in 2006, but surpluses of SFr600 million and SFr700 million in 2007 and 2008 respectively.

According to Finance minister Hans-Rudolf Merz, the budget cuts will affect six main areas: social security, transport, the army, education and research, agriculture and foreign relations.

The federal government accepts that the budget cuts will slow growth and increase unemployment in the short term.

But Merz stressed that the effects on the economy would not be too bad, emphasising instead the importance of balancing the books.

He cited the BAK Basel Economics research group, which calculated that the package was likely to lead to a decrease in gross domestic product (GDP) of only 0.2 per cent over the next five years.

BAK predicts that the savings programme will result in an additional 10,000 people losing their jobs.

The programme aims not only to cut spending, but also to increase revenue.

The government hopes to raise an additional SFr250 million between 2006 and 2008 by reinforcing financial controls on Value Added Tax (VAT) and federal taxes.

swissinfo with agencies

Key facts

Proposed spending cuts:

2006: SFr1.105 billion
2007: SFr1.846 billion
2008: SFr1.953 billion