The Swiss “Success Story” of Sustainable Public Finance: Debt Restrictions and Budgeting Processes in the Swiss Confederation

Abstract

In Switzerland, both the Confederation and all but one canton have introduced balanced budget provisions, the mechanisms of which vary to a large extent. On the federal level the so-called debt brake was first applied to the budget of 2003. Its goal is to keep the budget in balance while connecting matters of economic sustainability with anti-cyclical financial policy. Ever since, the debt ratio of the Swiss Confederation has been mainly decreasing. Furthermore, since 2006 the Swiss federal budget has been mostly in a surplus-even throughout the latest economic crises. The Swiss debt brake is considered a success story and has been referred to as a model for sustainable balanced budgeting which leads to a stabilization of public finances. The proof for the debt brake's success in the light of the last economic crises and despite the demographic challenges to the social security system still remains to be seen in the years to come. The successful mechanism of Switzerland's sustainable public finance, however, is not solely based on a debt brake but includes a variety of different financial instruments. It is based on a comprehensive approach to a responsible financial policy connecting the public tasks to their costs and covering a short-term as well as a medium and a long-term perspective. And it is supported by a political consensus to prevent an increase of public debt.