Public Debt and Fiscal Rules

Transcription

1 Public Debt and Fiscal Rules Financial Stability Seminar Madrid, April, 1 Fritz Zurbrügg Director, Federal Finance Administration

2 Deficit International debt crisis Public Deficit and Debt In percent of GDP Spain 6% Switzerland 7-11 Switzerland Germany ' bn $ Circle surface represents nominal gross debt United Kingdom Germany United States France Italy Italy Japan - 3% - 6 Spain France - 8 United Kingdom - 1 United States Japan - 1 Source: IMF, WEO Sep. 11 Debt

3 Deficit Fiscal Consolidation Public Deficit and Debt In percent of GDP 6% Switzerland Germany Switzerland Germany United Kingdom France Italy 5' bn $ - 4 Spain Italy - 3% Circle surface represents nominal gross debt - 6 Spain France United States Japan - 8 United Kingdom - 1 United States Japan - 1 Source: IMF, WEO Sep. 11 Debt 3

4 Switzerland s real estate crisis of the 199s Real estate price indices 198= Rental apartments Owneroccupied apartments Single-family homes Source: SNB Growth difference CHE vs EU-15 in percentage points 3 Jobless rate in percent Source: SNB Public Deficit in percent of GDP Source: OECD Source: Feder Finance Administration

5 A Decade of Debt Federal Government Gross Debt 3 1 in bn of Swiss franc (rhs) in percent of GDP (lhs)

6 Swiss debt brake: concept Revenues Expenditures surplus deficit maximum expenditures = revenues adjusted for business cycle expansion recession time nominal debt business cycle debt decreasing debt increasing nominal debt remains constant (over an entire business cycle) time 6

7 Factors for a successful fiscal rule 1. The rule should be simple and transparent heart of the debt brake is an expenditure rule. The rule should take due account of the business cycle no procyclical fiscal stance 3. Comprehensive scope for application no exclusion of investment spending 4. The rule should take into account exceptional circumstances escape clause for exceptional spending 5. The rule must include a sanction mechanism for deviations consolidation measures mandatory by law if certain limits are exceeded 7

8 Track record (I) Federal Goverment Structural Deficit

9 Track record (II) Federal Goverment Gross Debt 3 5 in bn of Swiss franc (rhs) in percent of GDP (lhs)

10 Long-term challenges: aging population Increase in demographics-related spending by 6 In GDP percentage points Education Unemployment benefits Long-term care Health care Pensions Switzerland Germany Austria Netherlands Spain EU-7 Source: Federal Finance Administration; European Commission: 9 Ageing Report 1

11 Conclusions: Experiences and Limitations Positive experience so far Introduced top-down approach into fiscal policy, which facilitates budget process Rule-based fiscal policy strengthens fiscal responsibility within coalition government and within parliament Forces rapid reaction to changing budgetary situations However no panacea Problems of budget quality remain in the responsibility of the political system Focus of debt brake is short term: no direct incentive to tackle long-term challenges 11