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'Extraordinary measures': What could Switzerland do to ease soaring cost of living?

Helena Bachmann in Geneva
Helena Bachmann in Geneva - [email protected] • 21 Sep, 2022 Updated Wed 21 Sep 2022 11:16 CEST
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Swiss MPs debate emergency measures to cut the rising cost of living. Photo by Fabrice COFFRINI / AFP

Switzerland's National Council is starting to debate ways to counteract the inflation and increase the declining purchasing power of Switzerland’s consumers.

Although, at 3.5 percent, Switzerland’s current inflation rate is much lower than across the eurozone (where it is about 9 percent), prices of many consumer goods and services have gone up and are expected to increase further.

This situation is prompting MPs to come up with measures to ease the inflation woes in a country whose economy is normally stable and robust.

"Extraordinary situations require extraordinary measures”, said Philipp Matthias Bregy, leader of the Center parliamentary group.

The MPs will focus mainly on three issues that are particularly prone to price hikes and are likely to affect Swiss consumers the most:

Old age pension (AVH / AVS)

Normally, these pensions are adjusted every two years, taking into account the development of wages and prices. But as salaries have hardly increased, while inflation is now higher than usual, pensioners risk losing their purchasing power in 2023. 

To avoid this situation, the centre-left alliance is pushing for full compensation of this price increase, by raising the minimum monthly pension by 30 or 40 francs.

The increase would not only benefit the 2.5 million pensioners in Switzerland, but also the beneficiaries of invalidity pensions and supplementary benefits.

READ MORE:  EXPLAINED: How does the Swiss pension system work – and how much will I receive?

Health costs

The costs for Switzerland’s healthcare system have been soaring in the past few years, and he current higher-than-normal inflation is making the situation worse.

Based on the information released by Santésuisse, an umbrella group for health insurance companies, an overall increase of around 4 percent for 2023 will be the norm.

Unfortunately for the consumers, premiums for compulsory health insurance will likely rise by an average of 5 percent in the fall, according to online price comparison site, Comparis.

And many people could even see their premiums soar by more than 10 percent in 2023 — the sharpest hike in premiums in 20 years.

The center-left alliance in the National Council is urging the government to contribute 30 percent of the expected hike, to help low and middle-income families shoulder the higher costs.

However, the right-wing faction in the parliament is opposing this move, proposing instead that health insurance premiums be fully deducted from direct federal tax; this would, however, favour mostly high-income individuals.

The government has already set a plan to cut the spiralling health costs, which includes coordinated care networks, faster and cheaper access to medicines, and electronic invoicing.

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

Energy

With the prices of gas, electricity and fuel oil expected to soar considerably in 2023, political right and left have come up with their own proposals on how to mitigate these costs.

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

The right-wing Swiss People’s Party says the government should temporarily waive its share of the tax on mineral oils, worth more than 1 billion francs.

The Greens, on the other hand, are pursuing a different approach: they are asking for a temporary “energy supplement” for low-income households.

This supplement would benefit those who are affected by high energy prices the most.

What is the next step?

On Monday, the Council of States will decide on similar measures, including also the motion filed by Social Democrats asking for the government contribution of up to 260 francs per adult to ease the effect of the higher costs.

However, this motion is not expected to pass, experts predict.

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Helena Bachmann in Geneva 2022/09/21 11:16

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