Government unveils new stimulus package

More apprenticeships should be made available to youth under the package Keystone

The government has launched a third stimulus package to help stabilise the Swiss economy to counter a potentially "long and marked recession".

The cabinet on Wednesday called on parliament to approve three-fold measures worth SFr750 million ($688 million) that aim to meet the challenges of rising unemployment and higher health insurance premiums.

A first stimulus package of SFr1.5 billion was announced in November last year, and a second of more than SFr700 million followed in March.

“The economic outlook has continued to deteriorate since February when a decision was taken to launch a second series of measures,” the economics ministry noted in a statement.

An economics ministry body, the State Secretariat for Economic Affairs (Seco), was the latest to predict that the national economy is still in for a rough ride. It has lowered its gross domestic product (GDP) forecast, saying it expected the economy to shrink by 2.7 per cent in 2009 and 0.4 per cent in 2010. Consumer spending would drop by 0.5 per cent in 2009 but prices would rise by 0.9 per cent in 2010.

Switzerland slipped into recession last summer and in the first quarter of 2009 suffered the sharpest year-on-year contraction in GDP since 1976.

Return to growth

Finance Minister Hans-Rudolf Merz said at a news conference that he expected government revenues to remain low until 2013, adding: “2010 will be a difficult year, 2011 a very difficult year”.

The cabinet hopes that the fresh set of measures will “ease the consequences of the recession and favour a return to growth”.

The bulk of the package – SFr400 million – would be devoted to stabilising the job market.

Unemployment is currently around 3.4 per cent and Seco economists forecast it will rise to 5.5 per cent in 2010.

One measure is to set aside money to create temporary jobs for the long-term unemployed in non-profit organisations, and for specialised work in the areas of nature protection, tourism and youth.

Youth unemployment would be combated by providing more funds for further education and giving money to companies to hire young people entering the job market and to increase the number of apprenticeships offered.

Also included in the latest package is SFr200 million in subsidies for health insurance premiums, and a decision to delay by a year a planned rise in value added tax is designed to support consumer spending.

“Unconvincing measures”

The package received a mixed response from politicians, unions and business circles.

There was a cautious welcome from the Swiss Business Federation, economiesuisse, which noted that under soaring unemployment it was important to help those adversely affected in the job market. But it also called for the measures to be temporary and end by 2011.

Travail Suisse, a coalition of trade unions, said it was disappointed with the plans, noting that if the government thought there was an urgent need to take action, the steps put forward were too modest.

“The measures proposed by the cabinet certainly go in the right direction but are not in line with the scale of the crisis,” it said in a statement.

The Trade Union Federation argued the measures did not go far enough in supporting consumer spending. “The government policies reinforce the crisis by weakening purchasing power,” said its chief economist Daniel Lampart.

The recently merged centre-right Liberals-Radicals and the rightwing Swiss People’s Party rejected the measure outright. The Radicals said that the sums involved were too high and argued that firms would abuse planned incentives for employing young people. Both parties favour tax cuts instead.

The centre-right Christian Democrats were supportive, but opposed to covering health insurance premiums. Party President Christophe Darbellay said this was an “unconvincing measure that has already eaten up a third of the economic package”.

Left-leaning parties called for more money. The Social Democrats said they regretted that cabinet had stuck within the legal limits of national debt, which could have been exceeded under the circumstances.

Along with the Green Party, the Social Democrats would have liked to have seen more investments to promote renewable energy.

swissinfo.ch with agencies

Stimulus packages

In November, Economics Minister Doris Leuthard said SFr1.5 billion ($1.37 billion) would be made available to help stave off the worst ravages of the recession.

Nearly SFr1 billion was made available by unfreezing a “crisis reserves” – a voluntary fund that businesses paid into in exchange for tax breaks – and civil construction projects such as flood prevention schemes.

This first wave was staggered over several months at the end of 2008 and the start of this year.

Parliament approved a further package in excess of SFr700 million in March aimed mainly at transport infrastructure projects.

The funds have been met with a mixed response with left-leaning parties demanding more money and the right-wing favouring tax cuts instead.

In addition to the two stimulus packages, the Swiss National Bank has reduced interest rates to virtually zero, taken measures to prevent the Swiss franc appreciating too much and has bailed out Switzerland’s largest bank, UBS.