Federal deficit set to shrink by half

Despite better-than-expected results, the government still has a deficit to deal with Keystone Archive

Switzerland’s 2004 federal deficit is expected to be much lower than forecast – almost 50 per cent less than the figure originally budgeted by the government.

This content was published on February 11, 2005 - 10:57

Thanks to a combination of higher-than-expected revenue and less spending, the national accounts will be SFr1.7 billion ($1.4 billion) in the red, according to the Neue Zürcher Zeitung.

That compares with a projected deficit of SFr3.5 billion.

The Zurich newspaper reported on Friday that Finance Minister Hans-Rudolf Merz would present last year’s financial results next week.

The ministry has declined to comment on the paper’s figures ahead of the planned announcement.

According to the NZZ, 2004 revenue was SFr48.6 billion – SFr700 million (or 1.5 per cent) higher than budgeted.

On the other side of the account, it says total government spending was SFr50.3 billion – SFr1.1 billion (or 2.1 per cent) less than budgeted.

More tax income

The additional income stemmed partly from increased taxes on tobacco and a levy on casino earnings, which had not been included in the original budget calculations.

The federal government is also expecting a SFr2 billion windfall this year from its sale of shares in telecom operator Swisscom.

The improved performance of the national economy also led to additional income, in the form of higher-than-budgeted income tax.

No specific reasons are cited for the lower-than-expected government spending figure.

The announcement, if confirmed, will come as a pleasant surprise, as annual deficits have often been higher than originally predicted in recent years.

However, there have also been occasions when the numbers were not as large as originally feared.

Merz’s predecessor, Kaspar Villiger, was particularly renowned for his – some say deliberate – pessimism when it came to forecasts.

Cost-cutting spree

Experience has shown, however, that improvements in the financial results are anything but steady on a year-to-year basis.

The government is in the midst of a cost-cutting spree aimed at trimming the fat off the administration.

And proponents of further cuts say the better-than-expected result would be no reason to change course now, as a deficit of SFr1.7 billion in a relatively good year is still SFr1.7 billion too much.

The government’s latest cost-cutting proposals received support from a parliamentary commission this week.

However, the standing Senate finance commission warns that the long-term goal of a balanced budget will take longer than some members of parliament would like.

The rightwing People’s Party and sections of the centre-right Radicals have called for a neutral – balanced – budget by next year.

But the commission says that target will not be reached before 2007 at the earliest.


Key facts

Real 2004 deficit: SFr1.7 billion
Budgeted deficit for 2004: SFr3.5 million
Federal revenue: SFr48.6 billion
Federal spending: SFr50.3 billion

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In brief

The Neue Zürcher Zeitung reported on Friday that the 2004 federal deficit was likely to be much lower than expected.

According to the paper, the national accounts will be SFr1.7 billion ($1.4 billion) in the red.

The deficit had previously been projected at SFr3.5 billion.

Finance Minister Hans-Rudolf Merz is due to present last year’s financial results at a cabinet meeting next week.

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