Mon, Apr 17th 2023
In the aftermath of Switzerland’s Parliament voting to reject the government’s CHF109 billion guarantee on the shotgun merger of UBS and Credit Suisse, two questions remain: Is the vote binding? And if not, what does it mean for Switzerland’s democracy?
On March 19, the Swiss government and financial watchdog FINMA announced that UBS would purchase CS for CHF3 billion in a last-ditch effort to save the failing bank. Switzerland put up a state guarantee on the merger totaling about one-third of the country’s GDP.
The deal was made secretly over a weekend without consulting investors, clients or shareholders. Parliament’s six-member finance delegation approved the merger. They cited an emergency law which they say allowed them to bypass Parliamentary approval. In the days following the announcement, Swiss citizens protested the move in the streets and politicians called for a special session, which was held last week.
During that session, Parliament voted to revoke the state guarantee on the merger.
While some international publications called the vote a symbolic “slap in the face” for the Swiss government, local outlets asserted the legality of the vote.
“The defeat is symbolic as it cannot change the merger, but it is a blow for the government in an election year and makes it harder to build broad support among the population for the biggest corporate rescue in Swiss history,” Reuters surmised.
The vote is legal, according to Zurich public law professor Andreas Kley who spoke to local newspaper 20 Minuten.
“The Federal Council needs the approval of Parliament. This has the legally binding last word – and not the finance delegation, which provisionally and urgently approved the loans,” Kley said, citing Article 34 of the Swiss Constitution. He added that the government is not legally sanctioned to authorize contracts between banks.
According to Andreas Stöckli, professor of constitutional law at the University of Freiburg, urgent loans of this nature require both prior and post approval from Parliament, as is stated in Articles 28 and 34.
“It means that Parliament’s decision is legally binding,” Stöckli said. Moreover, if the decision is not honored it may bring Switzerland’s famous “direct democracy” model into question as the Parliamentarians reflect their constituents’ feelings on the matter.
“Legitimacy in Swiss politics has been weakened,” Swiss political scientist from Sotomo Michael Hermann told Reuters. “People who worried about an over-powerful government during COVID will see their fears confirmed. This is damaging for the trust in democracy – parliament says no, but the emergency credits still go through.”
One of Sotomo’s recent polls found that nearly two-thirds of the Swiss population are against the UBS-CS merger and that one-third are angry how the government went over Parliament to do so. According to Sotomo political scientists, the merger has had a side effect of increasing support for right-wing political parties in Switzerland like the Swiss People’s Party (SVP) and the libertarian Aufrecht Schweiz. Both parties may gain seats in Parliament in the October elections.
“It has not been a great moment for Swiss democracy. It is terrible parliament has been put in this position and basically circumvented,” said Social Democrat lower house leader Roger Nordmann told Reuters.
So far, the Swiss government has stated that it will take Parliament’s vote into consideration as it oversees the merger.
Swiss Finance Minister Karin Keller-Sutter said in Washington, D.C. on Friday that the vote would have “no consequence” on the merger moving forward.
“In Switzerland, we often pat ourselves on the back for having the oldest democracy in the world. Yet seven people decided on billions of francs of support, an unimaginably huge sum of money,” said Peter Kunz, an economic law expert at the University of Bern. “And the parliament has no say in the matter. The use of such emergency legislation, overturning antitrust rules, is a problem for Swiss democracy and rule of law.”
For now, Swiss politicians are calling for clarification when they meet this week in Parliament. Stay tuned.
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