SWITZERLAND – Economic growth is the best way to meet retirement and social welfare promises, says Swiss National Bank board member Philipp Hildebrand.

“The fact that these difficult long-term problems which lie at the heart of our social contract are being openly debated is a welcome development,” Hildebrand said in a speech to the Swiss-American Chamber of Commerce.

“However, short of reneging on promises that are deeply embedded in our cultural and social fabric, the most meaningful way to address these problems in the decades to come is to invigorate our economic growth performance.”

“The challenge for our politicians is a formidable one,” he added. “The political interests that defend the legislative hurdles which distort the domestic sector of our economy and thus undermine our growth potential are deeply entrenched.”

“As the time bomb of demographics continues to tick, it will become increasingly obvious that this process of_reform is not a luxury our society can contemplate. It is a necessity.”

He acknowledged that such a process might entail the short-term pain of higher unemployment as uncompetitive industries are forced to restructure.

The comments come as a recent poll found that 42% of voters said pensions were the most important issue ahead of parliamentary elections on October 19. Last month Swiss MPs approved plans to raise women’s retirement age from 63 to 65 by 2009.

In its most recent quarterly report, the SNB said that the pension system needed “extraordinary efforts”.

“With regard to funding, extraordinary efforts will be required to uphold the proper functioning of the old-age pensions system and to maintain the stability of our occupational schemes against a background of low interest rates.”

The SNB said that higher revenues – in the form of taxes or contributions – would be needed in the longer term. And such measures would be “more easily absorbed if economic growth is stronger”.