Federal government posted a deficit – for the first time in almost ten years – of 124 million Swiss francs in 2014. Shortfalls running into billions of francs are forecast for 2016 and 2017. The Federal Council is planning cost-saving programmes to prevent this from happening. The FDFA must also make cuts.
The days of plentiful tax revenues are over. Federal government went into the red in 2014 for the first time since 2005. The deficit is primarily attributable to lower revenues in direct federal taxation and VAT. The SNB’s net earnings have also decreased due to euro support buying. The federal treasury, which receives a proportion of this income, has felt the impact.
The debt ceiling has been adhered to despite the shortfall as this permits a cyclical deficit of 450 million Swiss francs. The fact that federal government has previously avoided running high deficits in the national budget is due to this fiscal regulation introduced in 2003. The debt ceiling ensures that the federal budget’s expenditure and revenues are balanced over the long term. It permits a deficit during a recession but requires a surplus during times of economic prosperity. Only in exceptional circumstances can the provision be deviated from and extraordinary expenditure incurred. However, this then has to be made up over the subsequent years. Despite the financial crisis from 2006 to 2013, Switzerland posted budget surpluses and reduced national debt to under 50 % of GDP.
As higher revenues are not anticipated over the coming years, the Federal Council has approved cuts to federal government’s budget of around 1.3 billion Swiss francs for 2016. According to the Federal Council’s stipulations, the FDFA must make a contribution with savings of 189.3 million Swiss francs. A large proportion of the savings will concern development cooperation. The FDFA must also save 1 % of the 2016 budget on personnel expenses.
An extensive, global network of representations is one of the FDFA’s top priorities, and it will make every effort to restrict the closure of representations to a minimum. It will therefore focus on the following measures:
The savings target has not been achieved despite all of these efforts, which is why the Federal Council has felt compelled to close the Swiss embassy in Paraguay and to replace it with an honorary consulate general under the embassy in Buenos Aires. This step was required owing to the relatively high savings target that has to be met in 2016.
The latest economic forecasts indicate that further savings measures will be required for the 2017 to 2019 financial plan years. The Federal Council therefore adopted a resolution on 1 July 2015 to present a stabilisation programme to Parliament for the three-year period indicated. It intends for this stabilisation programme to enter the consultation process in November 2015. The key figures will be published here as soon as they have been announced.
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