Swiss Reject Move to Bolster Pensions with Central Bank Profits

Posted 25 September 2006 @ 01:08 pm EET     Print     Reprint     E-Mail     Comments

GENEVA (AP) - Swiss voters have rejected plans to use central bank profits to shoulder the growing burden of state retirement pensions, dealing a blow to left-wing parties and trade unions which had spearheaded the idea.

Official results in a national referendum Sunday showed that 58.3 percent of voters had turned down the initiative, after warnings that it could undermine the rock-steady Swiss franc and was a bad solution to a real problem.

The "yes" camp had called for a portion of the Swiss National Bank's net profits to be paid into the state pension fund every year.

The proposal, which had been rejected by the Swiss government and parliament, also advocated a compulsory levy of one billion Swiss francs (807 million dollars, 630 million euros) on those annual profits for the cantonal governments.

Christophe Darbellay, head of the centrist Christian Democrats, praised voters for their "wisdom," saying that they had understood that the independence and credibility of the Swiss National Bank was at stake.

It was a bad idea to "swipe" funds from Switzerland's federal authorities and cantonal, or state, governments to finance the pension system, he said.

Traditionally, one third of the central bank's profit is distributed to the Swiss federal government while the rest goes to the 26 cantons.

Socialist Rudolf Rechsteiner, who headed the "yes" camp, said it was now up to the right to provide a new solution. He cautioned that the left would not accept any cuts in social security.

For Clive Church, emeritus professor of the Centre for Swiss Politics at the University of Kent in Britain, the result was a major blow for the left -- which is flexing its muscles ahead of national elections in 2007 in an effort to win a third seat in Switzerland's seven-member coalition cabinet.

"I'm not sure it will have much policy impact. They still have to sort out the deficit in social security, and that's going to be a long-running thing," he told AFP.

Among reforms previously suggested by the right are reduced pensions, or raised retirement age from the current 65 years for men and 64 years for women.

The government had already said that in the event of a "no" vote Sunday, it would boost the pension system with 7.0 billion Swiss francs from state coffers pending a longer-term solution.

Like many other wealthy nations in Europe and North America, Switzerland's ageing population is increasing the burden of pensions on public finances.

Switzerland currently has 1.7 million pensioners, out of a total population of 7.4 million people.

That represents one pensioner for every four workers, who pay compulsory pension fund contributions. By 2050, there are expected to be only two workers for every pensioner, starving the state fund, according to official forecasts.

The referendum alliance had estimated that 1.0 to 2.0 billion Swiss francs could be secured for pensions every year thanks to a "yes" vote.

However, Interior Minister Pascal Couchepin, who is charge of social affairs, had called the proposal a "bad good idea" because it would not be sustainable.

The Swiss National Bank also warned that "confidence in the Swiss franc" was at stake.

The bank made a net profit of 12.8 billion Swiss francs in 2005, partly fuelled by the impact of high gold prices on the bank's recent bullion sales, which are due to end soon.

Net profits fell by 72.4 percent to 1.96 billion Swiss francs in the first half of this year, due to foreign exchange losses and rising interest rates.

Referendums are the cornerstone of Switzerland's democratic system, which can give the 4.8 million voters the final say on national, regional and even village issues in popular votes which are held several times a year.