Switzerland must adjust to lower growth in the EU

Even Switzerland, long impervious to crisis, is facing uncertain economic years ahead, to which it must proactively adapt. That is the most important message contained in the OECD Economic Survey of Switzerland which was presented on January 24th 2012 in Berne by OECD General-Secretary Angel Gurría and Swiss Federal Councilor Johann N. Schneider-Ammann.

"Switzerland is likely to suffer as a result of the economic slowdown among its trading partners, particularly in Europe, as well as from the pressures for appreciation of the Swiss franc", stated Gurría in the economic outlook for Switzerland." The recommendations proposed by the OECD to counteract this are set out in the country report.

A fundamentally expansionary monetary policy ought to be pursued in the short term. The OECD does not view this as threatening the stability of the franc. But care must be taken to avoid the creation of a real estate bubble as a result of low interest rates. The survey therefore recommends effective supervision of the mortgage market by the Swiss National Bank (SNB). The SNB should also be given the necessary powers to counteract if necessary the formation of a bubble, particularly in the residential real estate market.

Risks from the banking sector – here the report focused in particular on major international banks – could be countered with further regulation and requirements with respect to the debt ratio and a greater equity ratio of the highest quality capital.

With regard to tax policy, the OECD experts recommend that Switzerland limit what they view as undesirable tax competition within the country. The incentives for private households to take on debt should also be reduced. Regulations permitting private households to write off interest liabilities against income tax could also be abolished. The experts are also in favor of the possibility of freeing up regional authorities to increase real estate taxes.

At the same time, income taxes should be reduced. Higher consumption taxes should be levied as a counterbalance, particularly in the form of a unified, increased sales tax.

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