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Swissair crisis threatens to derail economic liberalisation

Both the government and the banks have come in for criticism swissinfo.ch

The Swissair debacle has raised questions over how big a role the government should play in the running of the economy. Analysts say the fact that the government had to intervene to get the airline flying again is leading to scepticism about the free market.

This content was published on October 4, 2001 - 19:07

The airline was forced to ground all of its flights this week, leaving thousands of passengers stranded.

After days of chaos, the government intervened to provide a SFr470 million credit line to Swissair so it could keep flying until the end of the October, when the bulk of its operations are due to be taken over by its former regional subsidiary, Crossair.

Political analysts say the government's intervention has reinforced the view that the state's role in the economy should not be further reduced. The government is currently considering whether to sell its stakes in the telecommunications operator, Swisscom, the Post Office and the Federal Railways. The privatisation of the electricity industry is also being debated.

Peter Studer, former editor-in-chief of Swiss television and the Tages-Anzeiger newspaper, told swissinfo "the neo-liberal agenda has been carried too far, and what we are seeing now is a reaction in the midst of a number of crises".

Free market economy

Walter Frey, of the Swiss People's Party, a strong advocate of the free market economy, agrees that support for de-regulation is likely to waver in light of the crisis. "For all the upcoming liberalisation moves the political climate is now very harsh," he said.

Switzerland's two main banks, UBS and Credit Suisse, have seen their reputations battered by what is perceived as their failure to ensure that Swissair was able to continue operating until it is wound up at the end of the month. They arranged a SFr1.4 billion bailout package for the airline, but made no provision to avert an immediate cash crunch.

Studer added that the public is already suspicious about privatisation, and the banks' handling of the crisis is likely to reinforce this perception.

"In a number of local votes on [privatising certain industries], it was very clear that the people have become very suspicious," he said. "There were local votes in Zurich on the privatisation of electricity utilities, and there were a number of influences, for example the electricity crisis in California, which have led the local voting population for the time being to say no."

Embarrassing situation

Studer says not all the blame can be laid at the door of the banks, though. In his view, government dithering turned an embarrassing situation into a crisis.

"The banks have handled this very badly, but I think the government will have to answer a number of questions, too," he added. "The United States and Belgium, for example, which are both run on a rather conservative course in terms of economic management, have been much faster than Switzerland in aiding their airlines."

UBS in particular has come under fire because its chairman, Marcel Ospel, could not be reached in the middle of the crisis, when the government was trying to broker a cash injection with the two banks.

Peter Studer says the banks' efforts to minimise the state's role in the economy have now come back to haunt them.

"Major forces in the Swiss economy have been very aggressive in demanding a reduction of the state's role in the past few years... especially the two major banking personalities, UBS's Marcel Ospel and Credit Suisse's Lukas Mühlemann. I think the pendulum will now swing to the middle, and it will be very clear to everyone that the state has a responsibility for the maintenance of public service."

Swissair crisis

Political analyst Julian Hottinger, from the University of Fribourg, says the left is likely to use the Swissair crisis to justify an increased role for the state in the economy.

"The left have already been saying that Swissair should have been taken over by the state, and run as a public company instead of a private one," he explained.

"And they will use the case of Swissair to justify the view that the state should continue to intervene in certain sectors. What is hard to say is how much weight the Social Democrats carry when these issues are put forward in a referendum."

Hottinger's view is that, in the longer term, the public will support privatisation, provided it is done slowly and carefully. "I think people will be saying 'maybe we should slow down'. They are not necessarily against privatisation, but they will want it be done slowly and under the supervision of the state."

by Jonas Hughes

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