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UKRAINE

How Covid, Ukraine and energy costs are changing Swiss spending habits

The war in Ukraine and the subsequent trade and financial sanctions against Russia are expected to have further repercussions on the budget of many households in Switzerland. This is how.

How Covid, Ukraine and energy costs are changing Swiss spending habits
You'll need more of these in your household budget. Photo: Pixabay

Beyond the political and humanitarian effects of the war, which are the most important considerations in any armed conflict, there are also far-reaching economic consequences for nations and individuals alike.

Switzerland’s households have already felt the impact of higher costs on certain essential goods, and more price hikes are predicted.

What did the Swiss spend most of their money on in the past years?

In 2020, the last year for which official data is available, a large portion of an average household’s total disposable income — 5,296 francs — was spent for the consumption of goods and services.

Consumer spending represented 52.4 percent of gross household income. Expenses for housing and energy were the biggest burden on the budget, at around 1,456 francs, or 14.4 percent of gross income.

Taxes took out 1,182 francs per month, or 11.7 percent of income.

Also part of compulsory expenditure were social insurance and pension fund contributions (10.2 percent of gross income) as well as health insurance premiums (6.5 percent).

Transport costs amounted to 7.4 percent, followed by food and non-alcoholic beverages (6.3 percent), restaurants (5.8 percent), and leisure and cultural activities (5.4 percent).

READ MORE: What do people in Switzerland spend their money on?

In terms of food and beverage, the highest single expense in Switzerland in 2020 was on meat — 1,383 francs a month. 

The next highest single expense category (1,237 francs) were drinks, followed by dairy products (1,026 francs), while breads and cereals cost 840 francs. 

In all, meat and eggs made up 35.6 percent of food expenses, while fruits and vegetables accounted for 13.7 percent.

READ MORE: Meat, cheese or booze: What do the Swiss spend the most money on

How will the war change these spending habits?

What we know so far is that at least two categories of consumer goods are getting more expensive and will likely continue to take a bigger chunk out of an average family’s monthly budget: energy (which includes electricity, fuel, and petrol), as well as certain food items.

This is why:

Russia is a major producer of oil and gas, though exactly how much of it is imported into Switzerland is not certain.

However, the prices of petroleum products in Switzerland rose by 6.1 percent after the invasion, according to a report by SRF public broadcaster.

Petrol prices have already exceeded more than 2 francs per litre in some cantons, and other energy-related costs are soaring as well, prompting the government to consider whether financial help might be necessary for low-income households.

Petrol prices in Switzerland are climbing. Photo by Erik Mclean on Pexels

Be it as it may, energy costs are now likely to take out an even  bigger share of an average household’s expenditures.

In terms of food, budgets will take a hit as well, as 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

The reason is that Ukraine is commonly known as the breadbasket of Europe because 12 percent of the world’s wheat supply comes from the Eastern-European country. It is also among the largest exporters of corn.

The (relatively) good news is that only 3 percent of Switzerland’s wheat comes directly from Ukraine, with the rest sourced either locally or from the EU.

But while the reliance on these imports is not enormous, if the Ukrainian crisis continues, prices of bread and other wheat-based products are likely to climb. One problem could be availability and price of fertilisers used in agriculture, as natural gas from Russia is needed to manufacture them.

This means foods derived from agriculture are becoming more expensive as well, consuming, as it were, a bigger chunk of family budgets.

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POLITICS

‘Colossal’: World leaders meet in Switzerland for Ukraine recovery conference

Leaders from dozens of countries, international organisations and the private sector gathered in Switzerland Monday to hash out a "Marshall Plan" to rebuild war-ravaged Ukraine.

‘Colossal’: World leaders meet in Switzerland for Ukraine recovery conference

Ukrainian President Volodymyr Zelensky, who will take part virtually, warned Sunday that the work ahead in the areas that have been liberated alone was “really colossal”.

“And we will have to free over 2,000 villages and towns in the east and south of Ukraine,” he said.

The two-day conference, held under tight security in the picturesque southern Swiss city of Lugano, had been planned well before Russia launched its full-scale invasion on February 24.

It had originally been slated to discuss reforms in Ukraine, but once the Russian bombs began to fall it was repurposed to focus on reconstruction.

As billions of dollars in aid flows into Ukraine, however, lingering concerns about widespread corruption in the country mean far-reaching reforms remain in focus and will be a condition for any recovery plan decided here. 

‘Roadmap’

Lugano is not a pledging conference, but will instead attempt to lay out the principles and priorities for a rebuilding process aimed to begin even as Russia’s war in Ukraine continues to rage.

Ukraine’s ambassador to Switzerland Artem Rybchenko said ahead of the conference that it would help create “the roadmap” to his country’s recovery.

Zelensky had initially been scheduled to come and co-host the event alongside his Swiss counterpart Ignazio Cassis, but now he is due to give his address Monday afternoon via video link.

Ukrainian Prime Minister Denys Shmyhal has however made a rare trip out of Ukraine since the war began to attend, and was met at the airport Sunday by Cassis and regional leaders.

Five other government ministers were also among the around 100 Ukrainians who made the long and perilous journey, although Foreign Minister Dmytro Kuleba reportedly had to cancel at the last moment due to illness.

In all, around 1,000 people were scheduled to participate in the conference, including European Commission President Ursula von der Leyen, several government chiefs and numerous ministers. 

‘Marshall Plan’

Questions have been raised about the value in discussing reconstruction when there is no end in sight to the war.

But Robert Mardini, director-general of the International Committee of the Red Cross, told the RTS broadcaster that while the reconstruction itself could only happen fully after the bombs have stopped, it is vital to give “a positive perspective to civilians who have lost their homes, and who are struggling with anxiety and uncertainty for the future”.

Others stress the need to begin laying the groundwork well in advance, as was done with the wildly successful Marshall Plan, a US initiative that pumped vast sums in foreign aid into Western Europe to help the continent rebuild and recover after World War II.

The task is daunting.

Rebuilding Ukraine, which four months into the war has already seen devastating destruction, is expected to cost hundreds of billions of dollars.

The effort will require “colossal investments”, Zelensky acknowledged at the weekend.

Kyiv School of Economics (KSE) has estimated the damage done so far to buildings and infrastructure at nearly $104 billion.

It estimated that at least 45 million square metres of housing, 256 enterprises, 656 medical institutions, and 1,177 educational institutions had been damaged, destroyed or seized, while Ukraine’s economy had already suffered losses of up to $600 billion. 

Could last decades 

Simon Pidoux, the Swiss ambassador in charge of the conference, said that it was too early to try to estimate all the needs, insisting Lugano instead should provide “a compass” for the work ahead.

“I think the effort will last for years if not decades,” he said.

While not a donor conference, a number of participants are expected to make new pledges and propose frameworks for providing more funds.

The European Investment Bank will for instance propose the creation of a new Ukraine trust fund, which with investments from EU and non-EU states could eventually swell to 100 billion euros, according to sources familiar with the draft plans.

The proposal, which is due to be announced Monday afternoon, aims to create a platform able to generate investment towards reconstruction, and also towards Ukraine’s EU accession goals, they said.

British Foreign Secretary Liz Truss is meanwhile due to set out her country’s vision for the rebuilding, according to a statement. In her comments to the conference Monday, she is expected to highlight the importance of Ukraine’s full recovery from “Russia’s war of aggression”. That, she will say, will be “a symbol of the power of democracy over autocracy.”

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