mar, Juin 11th 2024
Switzerland’s prudent financial management shields it from the global debt crisis, thanks to its debt brake policy.
Switzerland’s debt stability stands out in a world grappling with increasing debt burdens and rising interest rates. The global debt crisis has reached unprecedented levels, with global debt now at a staggering USD 315 trillion, according to the Institute of International Finance (IIF). Post-pandemic, tax cuts and increased spending led to heightened debts, particularly in emerging markets like China, India, and Mexico.
Emerging markets accumulated significant debt post-pandemic, now totaling USD 105 trillion, an increase of USD 55 trillion over the last decade. Countries like India risk their debt surpassing economic output by the decade’s end due to natural disaster expenditures. The depreciation of local currencies against the US dollar further exacerbates the risk, as seen in Argentina.
High inflation in developed countries like the USA forces central banks to maintain high interest rates, impacting debt costs significantly. From 2009 to 2022, US interest rates were between 0% and 2.25%, but have since risen to around 5.25%-5.50%, dramatically increasing daily interest payments. Projections by the US Congressional Budget Office (CBO) indicate that interest payments could consume 35% of federal revenue by 2051.
Switzerland, however, remains resilient. The country implemented a debt brake in 2001, stabilizing its financial health. Without this measure, Switzerland’s debt would be 56% instead of the current 15%, saving the government CHF 4 billion annually in interest. This financial prudence fosters confidence, reflected in low interest rates and a strong currency. Economists emphasize that such stability provides crucial maneuvering space in crises.
Despite its stability, Switzerland isn’t entirely immune to global risks. As an export-oriented nation, it faces potential repercussions from global financial crises and market instabilities. However, Switzerland’s robust financial policies offer a protective cushion against these external threats.
©Keystone/SDA
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