Brussels, 29/02/2012 (Agence Europe) - The budget pact will be signed by 25 EU member states (the United Kingdom and the Czech Republic have refused to sign) at the upcoming European summit on 1-2 March, and the infamous golden rule was the subject of a conference organised by the Swiss mission to the EU on Monday 27 February to show how the Swiss model might serve as an example, or model, for the 25 budget pact member states.
After a referendum in 2003, Switzerland introduced a new rule into its constitution to restrict government borrowing, along with a penalty system, in order to balance state expenditure and income over the long-term. Between 2005 and 2010, a period during which the eurozone nations' public debt rose from 70% of GDP on average to 85%, Switzerland reduced its public deficit by 13% to 40% of GDP. The Swiss model relies on huge financial autonomy for its regions (“cantons”), which although not directly concerned by the state debt reduction rules, introduced their own measures to ensure a viable budget policy.
During the debate in Brussels, the director of the Swiss federal finance office, Fritz Zurbrügg, said it was important to be able to introduce flexibility into budget rules to cope with exceptional circumstances, such as a strong recession or macroeconomic shocks from abroad, without such flexibility endangering the credibility of policies. Unlike the Swiss situation, André Sapir, professor of economics at the Université Libre de Bruxelles, recommended stabilisation work coordinated federally. Sapir says it makes no sense to talk about budget rules without discussing the wider concept of budget federalism, which should be based on the right balance between responsibility and solidarity so that budget policy is carried out in the name of solidarity.
Although the Swiss model is effective in many respects, the critics of the restrictions on state spending introduced in 2003 say that it has led to a lack of public investment, which is damaging to future generations, reducing growth prospects, explained the Swiss mission in a fact sheet distributed at the conference. (SD/transl.fl)