In the Swiss Sunday newspaper, NZZ am Sonntag, of 8 March 2009, two economists express critical opinions on the government’s active economic stimulus packages.

Jean-Daniel Gerber, Director of the State Secretariat for Economic Affairs (SECO) and Urs Müller, Chief Economist of BAK Basel Economics, are reserved by comparison with others, such as Olivier Blanchard, IMF Chief Economist (see one of the most recent blog articles).

Müller draws particular attention to automatic stabilisers such as unemployment benefits. Expenditure in this area increases when unemployment rises, and this automatically counteracts the fall in consumption. In boom phases, by contrast, there are fewer unemployed people, and the unemployment fund accumulates a surplus.

If the public authorities maintain a steady expenditure path, this will automatically result in surpluses in boom phases and deficits in crisis situations, thereby helping to stabilise the economy. By comparison, the contribution of economic stimulus programmes is small. Moreover, they are only to be advocated if they kick in during the recession, are limited in time and are targeted at industries which are badly affected by the crisis, says Müller.

Since Switzerland is a small open economy, a large part of the economic stimulus measures are lost to Switzerland and dispersed abroad, via imports. For Gerber, the main task of the Swiss government is to create favourable conditions in the domestic market and open up foreign markets by means of free trade agreements.

In Switzerland, the current economic crisis must therefore be solved, first and foremost, by stabilising the financial markets. Economic stimulus packages should be restricted to measures that are effective, rapid, targeted and limited in time, he adds.

On behalf of the iconomix team

Ronald Indergand