Estimates for the Structural Deficit in Switzerland, 2002 to 2007

Frank Bodmer and Alain Geier

OECD Journal on Budgeting, 2006, vol. 4, issue 2, 77-100

Abstract: The new Swiss budget rule or “debt brake” is based on the idea or rather the aim that the structural deficit should be zero.1 Therefore, the size of the structural deficit is of special importance for the conduct of fiscal policy under the debt brake. In 2003, it was estimated that there is a structural deficit in the order of CHF 3.5 billion, which represents about 7% of central government expenditure or under 1% of GDP. In comparison to the European Union deficit rule (Maastricht criteria) of 3% of GDP, this is of course a small number. However, this excludes the social security accounts, which are not included in the federal financial accounts in Switzerland. In addition, under the regime of the debt brake, the adjustment of a structural deficit has in principle to be immediate, which can be quite painful even for relatively small deficits. The adjustment can also be delayed, but this requires special provisions either through the law or through a decision of parliament to overrule the debt brake for extraordinary circumstances. The latter has to be supported by a qualified majority of both chambers of parliament.

Date: 2006
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