• Date: 9/1/2010
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The six factors driving growth in a successful Swiss economy 

The European Union is currently facing a tough test. Many governments are heavily in debt, the economic engine is barely gathering steam and confidence in the euro is being sorely tried. A few days ahead of discussions between the Swiss business community and representatives from the world of politics at the “Tag der Wirtschaft” (Economics Day) in Basel, Gerold Bührer, Chairman of economiesuisse, explains the consequences this will have for the Swiss economy and which factors driving growth could put us back on to the road to success.

KPMGnews: The “Tag der Wirtschaft” is being held on September 3 in Basel. What are the major topics up for discussion?


Gerold Bührer: I’m pleased that the Swiss business community is meeting in Basel this year. Basel embodies two characteristics that are also the focus of the conference, namely innovation and openness. As a hub for the pharmaceutical industry, Basel is a perfect example of innovation. Basel shows its openness in the way it has always managed over the years to make a place for itself in the triangle of land between France and Germany. I am especially pleased that we have succeeded in getting German Minister of Finance Wolfgang Schäuble to be our guest. We will conduct a frank dialogue on how we can maintain and strengthen the values of openness and innovation as guarantees of economic clout in future. Personally, I’m very much looking forward to these discussions.


The European Union is currently facing a tough test. Many governments are heavily in debt, the economic engine is barely gathering steam and confidence in the euro is being sorely tried. What are the consequences of this for the Swiss economy?


Bührer: The European states will continue to have a high level of debt even after the economy recovers, which represents a considerable handicap for the Swiss economy. In a global comparison, growth in western European states will be slowed for many years. For Switzerland, this means that we must keep costs as low as possible, strengthen the innovative power of Swiss industry and further increase the proportion of our exports to dynamic regions such as Asia or South America.


Is a separate Swiss currency not a handicap in view of the weakness of the euro?


Bührer: Whenever we are afflicted by real currency shocks or big jumps in the exchange rates, such as happened some time ago against the US dollar, or this year against the euro, of course it causes problems, even though it takes some time for the shrinking margins to filter through to a lot of companies. In the longer term, in other words viewed over recent decades, the Swiss economy has ultimately been able to cope with the increase in the value of the Swiss franc. The massive, constant pressure on Switzerland to be competitive has had a beneficial effect in the long term. We must assume that the Swiss franc will remain strong in the future. Swiss companies will have to live with it. On the other hand, I – and here I am also speaking as a representative of the exporting industries – would not like to see Switzerland as part of a soft currency area. The interest rate benefit for our capital-intensive economy and the social stability attributable to a strong and therefore trustworthy currency are advantage enough.


How does the business community rate the EU’s future in general and that of the European Monetary Union in particular?


Bührer: First of all, I would like to state that under no circumstances do we take any pleasure in negative developments in Europe. On the contrary – Switzerland’s interest in a stable European Monetary Union that functions well is paramount. Of course, the debt crisis has not yet been overcome. The debt mountain will continue to grow in individual states and in some cases will far exceed 100 percent of GDP, which represents an enormous, even unimaginable scale, and will create uncertainty for years to come. In my view, the Maastricht criteria must now finally be strictly enforced and a mechanism for applying sanctions in the event of corresponding breaches must also be introduced. It remains to be seen whether the European Central Bank (ECB) will return to a stringent policy. In the past, it has to a certain extent thrown its own principles out of the window. We are not yet immune to a new outbreak of crisis at any time if the ECB and the individual states do not succeed in restoring confidence in the currency.


Strong economic growth has always been the best way to escape from government debt because it is the most politically acceptable. In your opinion, do Switzerland and the surrounding EU countries have sufficient strength to clear their debt mountains through future growth?


Bührer: Of course, the simplest scenario would be for the below-average economic growth to be stimulated. But if we look more closely at what is slowing growth, we can see that the problem is not likely to be solved very quickly. In my opinion, there are, for now, three structural brakes that are inhibiting a healthy economic recovery. Firstly, in a global comparison, European taxation is much too high and is preventing entrepreneurship from prospering. Secondly, economic development is being impeded by a labor market that is far too rigid in many European countries, and thirdly we have too much bureaucracy in Europe and too narrow boundaries in terms of innovation, research and development.


How can the future long-term financing of Swiss welfare institutions be secured? What can the business community contribute?


Bührer: Individual governments’ massive indebtedness can of course be heavily ascribed to the excessive demands placed on welfare institutions. I hope that Switzerland will learn from other states’ negative experiences and mistakes and knows that it must not slip into the same downward spiral. We will have an initial indication of whether there is an awareness of future problems during the vote on unemployment insurance in September, where a moderate solution, a split between income and expenditure, has been agreed. The demographic trend and provision for old age represent another challenge, of course. The increase in the retirement age will be inevitable. I am mainly targeting an increase in the number of over-65s in employment, through incentives intended to make working into old age more attractive.


On several occasions, signs of an economic recovery have been identified, even if these only affect some sectors of the economy and are still weak. Can both exports and the domestic economy expect an upturn?


Bührer: The figures in fact confirm a moderate upswing, which has even exceeded our expectations. Despite the exchange rate problem, export growth, at seven percent, is considerable and will continue, in my opinion. The decline in overheated Asian markets could put a damper on recovery in 2011, in addition to the known weaknesses in the European market and the euro rate. I feel very positive about the trend in the domestic market. The decrease in the number of unemployed alone, to well below four percent, and the low interest rates for the time being, are underpinning domestic demand. Switzerland also has a big advantage as an extremely attractive location for investment, and is ahead of neighboring countries with respect to future tax increases and other uncertainties.


Switzerland is also currently plagued by a flood of regulations, or at least a wave of calls for more laws. Where, in your opinion, is a reverse trend required, in other words a wave of deregulation?


Bührer: If Switzerland has taken part in a move that is, in many respects, counterproductive, then it’s because of the belief that perfectionist regulation can steer us away from any and every risk into safe waters. This risk-averse mindset, which is essentially in conflict with entrepreneurship and innovation, has unfortunately gained the upper hand here. We must decisively oppose excesses, such as we encounter in traffic or construction law, for example, and in the appeals process. Obviously every economic industrial accident is one too many, but the train has traveled in the wrong direction for too long. I am, however, very pleased that, unlike our European neighbors, Switzerland has not done too much in the way of economic stimulus packages, even if internal political pressure to do so was very great. For once the government maintained its discipline.


Are there other fields in which the new regulations make sense, i.e. could strengthen the economy and society?


Bührer: With the financial crisis we had a problem at systemic risk level – the idea of being “too big to fail.” The industry does not contest that action was necessary in the field of equity coverage, compensation guidelines and liquidity regulations, and we supported these measures. It must be said that Switzerland is one of the few countries that not only talked about the necessary steps, but actually implemented them.


What are you hoping for from future economic policy, from the authorities and political parties?


Bührer: I’m hoping that Switzerland will focus on a long-term growth policy based on market economy principles. I don’t think much of large-scale, short-term programs to stimulate the economy, which ultimately have a very short shelf-life and are not likely to make a lasting impact. Specifically, we must first achieve access to global markets that is as open as possible for Switzerland; secondly, employment law that is as liberal as possible; thirdly, an attractive fiscal environment; fourthly, ideal conditions for education and research; fifthly, greater competition and a reining-in of bureaucracy and, last but not least, a high level of social stability. Promoting these six factors driving growth is much more effective than short-term economic stimulus programs.


Interview: Andreas Hammer, Brand & Communications

Short curriculum vitae

Gerold Bührer completed his degree in Economics (lic. oec. publ.) at the University of Zurich in 1972. After 17 years working in the financial division of Union Bank of Switzerland as a member of senior management and as a Member of the Executive Board of its fund investment company, from 1991 to 2000 he was a Member of the Executive Committee (Finances) at Georg Fischer AG. Since 2001 he has worked as an independent economic consultant and, as of the end of 2006, he assumed the chairmanship of economic umbrella organization economiesuisse. From 1982 to 1991, Gerold Bührer represented the Free Democratic Party of Switzerland (FDP) on the Grand Council (Grosser Rat) of the Canton of Schaffhausen, and was a member of the Swiss parliament (Nationalrat) from 1991 to 2007.

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