Economy For Members

What are Switzerland's four main challenges right now?

Helena Bachmann in Geneva
Helena Bachmann in Geneva - [email protected] • 9 Sep, 2022 Updated Fri 9 Sep 2022 12:28 CEST
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Most of Switzerland's concerns right now involve higher costs. Photo by Claudio Schwarz on Unsplash

While not so long ago Covid-19 and its repercussions on the economy were primary concerns for the Swiss government and public, these challenges have now shifted to other, more current issues.

Looking back at this point in time in 2021, the pandemic and its impacts ranked among the top concerns for Swiss residents.

But in a survey carried out in May, the focus shifted to the Ukraine conflict.  Three months into the war, the prospect of energy shortages did not make it to the top-10 things the Swiss were worrying about.

Now, however, the energy crisis is at the very top of the agenda and hardly a day goes by without warnings about impending power shortages and blackouts.

These are the four main challenges that Switzerland faces right now.

Electricity shortage

As Switzerland doesn’t have its own gas storage facilities and depends on neighbour countries for the supply (which also face energy-related challenges of their own), electricity could become scarce, plunging the country into darkness and cutting off heating as well during the coldest months.

In cases of extreme shortages, electricity operators will have to cut the power off for four hours every eight hours, including for households. Only certain infrastructures considered essential would be spared, such as hospitals, emergency and security services, water supply systems, and the emission of radio and television waves.

READ MORE: How energy shortages could hit daily life in Switzerland

In response to these challenges, the government has launched a campaign to cut energy consumption in Switzerland by 15 percent and “ensure that Switzerland can quickly boost its energy supply in preparation for winter”.

Its recommendations to achieve this goal include simple steps such as lowering the heating by 1C, turning off lights in unoccupied rooms, and switching off all electrical appliances, among other measures.

READ MORE: What the Swiss government is asking you to do to save energy

A number of Swiss cities have already responded to the government’s call and announced they would implement rules — for instance, lowering the temperature in all public administration buildings and switching off lights, including Christmas displays, at night.

Inflation / rising prices

Just like the energy crisis, higher prices for a number of consumer goods are caused by the ongoing war in Ukraine.

While a wide range of products are becoming more expensive — including food, clothing, furniture, transportation, and other everyday goods — the increase that worries the Swiss most is, not surprisingly, the cost of electricity which includes not only light but also heating.

After the approximately 630 Swiss electricity operators published their tariffs for 2023 on August 31st, it became clear that  households will not only have to spend more on energy in the coming year, but that the spikes will be substantial.

Though prices across Switzerland will vary depending on a variety of factors, “a typical household will pay 26.95 centimes per kilowatt hour, which corresponds to an increase of 27 percent”, authorities said. “However, the differences can be much greater at the local level”.

In Vaud, Basel, and Zug, for instance an average hike will be between 39 and over 40 percent, with some customers even paying 61 percent more in Vaud.

READ MORE: Swiss government confirms ‘sharp increase’ in electricity prices

However, while these huge increases — and higher-than-usual inflation in general — are naturally a source of concern to consumers, and will be debated by MPs this fall, the Federal Council doesn’t have any plans to offer financial help to the hardest-hit households.

As Finance Minister Ueli Maurer said in an interview, even if energy prices were to remain at a high level in the coming years, the Federal Council does not plan to intervene.

“The state cannot suddenly subsidise a market and no longer be able to get out of it afterwards”, he said.

Healthcare costs

Another area impacted by higher prices, though in this case energy crisis doesn’t play a role, are the increasing costs of Switzerland’s health system.

Over the past 20 years, costs have risen at twice the rate of economic growth, and they continue to climb: premiums for the compulsory insurance, as well as overall costs of healthcare, are set to increase by 4 to 5 percent in 2023

To curb this upward trend, the Federal Council is planning to implement a range of reforms to reduce costs and ensure that not so many are passed on to consumers. 

Among the proposed cost-cutting measures — to be debated in the parliament this autumn — are coordinated health networks, seen as a way to save money and eliminate unnecessary medical procedures; cheaper medications; and electronic invoicing for treatments.

In its fall session, socialist and Green MPs will push for the government to subsidise health insurance premiums to the tune of 30 percent, but this motion will face opposition from the right-wingers.

READ MORE: EXPLAINED: How Switzerland wants to cut soaring healthcare costs

Security / closer ties with NATO

With Russia’s invasion of Ukraine, the long-cherished concept of neutrality is weakening here, with many in Switzerland now urging a closer cooperation with the NATO alliance.

In her new report, Defense Minister Viola Amherd speaks of the importance of Swiss army’s participation in NATO training exercises, stressing that such a move “would not be incompatible with neutrality”.

A number of MPs also support this stance.

For the Liberal party, for instance, “the illusion of an autonomous national defense must be buried”.

“NATO makes any land or air attack against Switzerland virtually impossible”, according to party president Thierry Burkart.

The public seems to be on board.

A recent survey by The Swiss military academy and the Centre for Security Studies — both attached to ETH Zurich university — showed that an unprecedented 52 percent of respondents now favour moving Switzerland closer to the Western alliance.

And 35 percent now think joining a European defensive grouping would increase security more than maintaining neutrality — up 12 percent since January 2021.

READ MORE: EXPLAINED: Why isn’t Switzerland in NATO?

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Helena Bachmann in Geneva 2022/09/09 12:28

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