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COST OF LIVING

EXPLAINED: Why Switzerland has escaped the global spike in costs of living

Across the globe, inflation has hit its highest rate for decades in several countries, whereas Switzerland has been largely spared. Why?

Groceries are getting more expensive in Switzerland - but the increase is lower than elsewhere. Photo by Maria Lin Kim on Unsplash
Groceries are getting more expensive in Switzerland - but the increase is lower than elsewhere. Photo by Maria Lin Kim on Unsplash

In March 2022, Switzerland recorded an inflation rate of 2.4 percent. While this is no doubt concerning by Swiss historical standards and is the highest level for a decade, it pales in comparison with inflation rates elsewhere. 

Spain’s rate of 9.8 percent inflation is the highest for 37 years

Germany is currently struggling under an inflation rate of 7.3 percent, which is the highest since reunification. 

Denmark has seen an increase of 4.2 percent, while in the US, inflation is currently at 7.9 percent.

Why is inflation so high? 

The factors driving inflation across the globe are largely similar: the fallout from the Covid pandemic and Russia’s invasion of Ukraine. 

Uncertainty surrounding the Covid pandemic since the first lockdowns were imposed in early 2020 led to problematic economic consequences, which in turn led to inflation. 

More recently, Russia’s invasion of Ukraine drove up prices of raw materials, fuelling inflation and higher cost of consumer goods.

READ MORE: How Covid, inflation and the Ukraine invasion has made Switzerland more expensive

Why is Switzerland spared? 

There are a variety of factors why Switzerland is insulated from the global inflation wave. 

Economist Thomas Jordan told Swiss media the franc remains a safe haven currency and as long as it remains strong, imports will remain cheap – which removes pressure on inflation. 

As Switzerland relies on imports much more than many countries, including the United States and Germany, lower costs of imports has a cooling effect on inflation. 

Geissbühler says Switzerland remains “in an absolutely comfortable position” when it comes to inflation. 

Writing in the NZZ, Thomas Schürpf agreed that the strong Swiss franc helps boost purchasing power. 

“This makes imports cheaper across the board. The strong Swiss franc helps the Swiss to have high purchasing power internationally. And imported goods are the main drivers of inflation.”

Parity with the euro: Why the Swiss franc is now so strong

High Swiss wages also means that the percentage of consumer spending allocated to fuels and heating material is just 3.03 percent, compared to 7.11 percent in Germany and 4.97 percent in the US. 

Economiesuisse also points out that while energy costs are driving inflation elsewhere, Switzerland’s energy efficiency means it produces goods with half the energy needed in Germany, the United States or elsewhere abroad.  

Schürpf also identifies another major reason is the high taxes on fossil fuels in Switzerland, which results in lower percentage price increases in the instance of global oil and gas shocks than in countries with lower taxes. 

Is there anything I can do? 

That said, with the ongoing impact of the pandemic uncertain, there are some tried and tested measures to avoid the negative impacts of inflation. 

When inflation is high, simply sitting on large cash reserves will see that slowly whittled away. 

There are several investment options you could consider, including gold – always a favourite in Switzerland – securities and the Stockmarket, real estate or even newer ideas such as cryptocurrency. 

These are outlined in the following report. 

READ MORE: How to protect your savings against inflation in Switzerland

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For members

UKRAINE

‘Limited capacity’: How the Swiss right wants to shut out western Ukrainian refugees

With about 51,000 refugees from Ukraine currently in Switzerland, right-wing politicians argue in favour of introducing geographic vetting in regards to who can qualify for Status S, saying Switzerland has "limited capacity" for refugees.

'Limited capacity': How the Swiss right wants to shut out western Ukrainian refugees

After Russia invaded Ukraine on February 24th, the Federal Council activated, for the first time ever, the ‘S status’ authorising Ukrainians and Ukraine residents fleeing the war to live temporarily in Switzerland.

The special status is initially valid for a year, but can be extended. Anyone who is still in Switzerland after five years receives a B permit.

Included is also the right to work, as well as free health care and language courses. The refugees also have the right to free public transportation, but this perk will end on May 31st, with no word yet whether it will be renewed.

READ MORE: Switzerland’s special ‘S permit’ visa program: What Ukrainians need to know

Now, however, “the great solidarity with refugees from Ukraine is cracking”, according to SonntagsZeitung, which reports that rightwing politicians in Switzerland are “beginning to question our country’s culture of hospitality”.

The right-wing Swiss People’s Party (SVP), which has consistently opposed sanctions on Russia, is calling on the government to limit the S status  only to Ukrainians who come from the eastern part of the country, which is currently most impacted by Russia’s invasion.  

This movement is spearheaded by MP Martina Bircher, who argues that Switzerland is reaching its limits in terms of the number of refugees it can accommodate and support, and it should therefore grant S status only to those fleeing the most conflict-ridden regions of Ukraine, like the eastern part.

Other right-of-centre groups are in favour of this “regionalisation” as well. Andrea Caroni, president of the centre-right Liberal Party, supports the idea of granting the special status based on the geographical evolution of the Ukrainian conflict, saying Switzerland “ultimately has limited capacity” to absorb refugees from Ukraine. 

He said, however, that such a measure “must be coordinated at the European level.”

Not everyone, however, agrees with Bircher’s proposal.

According to Gerhard Pfister, president of the Centre Party, adopting geographical limitations “would create two classes of Ukrainians. This is not right”.

It is unclear how the SVP would seek to draw barriers to distinguish between the east and west of the country. 

As for the Conference of Cantonal Directors of Social Affairs, vice-president Marianne Lienhard said the organisaton will discuss the proposal at its next meeting at the end of May.

Cantons are directly affected by the influx of Ukrainians, as they will eventually bear the cost of supporting the refugees — the cost which is currently borne mostly at a federal level.

The “NZZ am Sonntag” calculated that in 2022, the costs of housing, health insurance, and general support will amount to between 1.25 and 2.25 billion francs. In 2023, these expenses could climb to 7.5 billion.

“Fake” refugees

In an article she wrote for the SVP website, Bircher also argued that some refugees pretending to be Ukrainian actually aren’t.

As an MP from Aargau, she claims that out of 12 people who received the S status in a small town in her canton, only seven were Ukrainian nationals. The other five came from Africa.

Among them are  “Kenyan and Lebanese men who claim to have lived in Ukraine or who actually lived there before the war, but who do not have a Ukrainian passport”.

The S permit scheme does not only provide protection for Ukrainian citizens, but also citizens of other countries who live in Ukraine. 

While reserved predominantly for Ukrainians, the S status has also been occasionally granted to citizens of other countries. 

According to the State Secretariat for Migration (SEM), about 1,000 “other” refugees received this status as well, including 238 Russians, and  people from Germany, France, Italy, the United States, Canada and Australia.

In such cases, children have a different passport from their parents, but it is the parents’ nationality and place of residence that defines whether the status is granted.

So it could happen that the parents have Ukrainian passports, while their children are citizens of other nations.

READ MORE: Swiss MPs call for Russian money to be used to reconstruct Ukraine
 

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