SWITZERLAND – Top government officials have dismissed as “explosive” a proposal to use some of the Swiss National Bank’s profits to shore up the state pension scheme.
The idea has been spearheaded by the Swiss Social Democratic party (SP).
Under the proposal, CHF1bn (€640m) of the central bank’s CHF2.5bn in estimated annual profit would be diverted to the scheme. The SP says a key benefit of the proposal is the ability to keep pension contributions from employers and employees stable.
But Swiss finance minister Hans-Rudolf Merz dismissed the proposal as “explosive”, arguing that it not only would mean far less money for the government and Swiss cantons, but also would undermine the independence of the SNB.
SNB president Jean-Pierre Roth echoed Merz’s rejection of the proposal, adding that its proponents widely overestimated the central bank’s annual profit. According to Roth, the figure is closer to CHF1bn.
Roth also stressed that the proposal “undermined the credibility of the central bank”.
“And if the credibility is missing, this will encourage speculation (against the Swiss franc). It will also increase the costs of maintaining stable monetary policy,” he said in a presentation on the SNB’s website.
Merz, a member of the liberal Free Democrats, got further support in his opposition to the proposal from Lorenz Bösch, president of the Swiss Conference of Cantonal Governments. Bösch says the proposal could lead to cuts in state subsidies and push the cantons further into debt.
The officials’ rejection of the proposal comes ahead of a national referendum on it in September. The SP is not in opposition in Switzerland, but instead has two ministers in government, namely Moritz Leuenberger and Micheline Calmy-Rey.
According to press reports, the SP charges that opponents to its proposals are really interested in cutting social benefits and that their criticisms are simply a red herring.
Rudolf Rechsteiner, an SP parliamentarian, rebutted the claim that the proposal would undermine the SNB’s independence, saying the bank would continue do decide how its profits were distributed.
In other Swiss news, Pensionskasse Basel-Stadt, the embattled CHF7.2bn public pension fund, said a good return on its assets in 2005 enabled it boost its coverage ratio to 78% from 72.3%.
However, “the good result should not belie the fact that the scheme’s funding is still shaky and that, hence, there is no stability”, PKBS, which insures civil servants in Basle, said.
Basle’s city government is currently engineering a bailout of the scheme the financing of which will be split between it and the scheme’s 20,300 members.