mw. On Friday, 20 March 2020, the Federal Council adopted key points for a liquidity support programme for companies in the form of guarantees to be provided by the Federal Government. Five days later, Federal Councillor Ueli Maurer, Head of the Department of Finance, presented the financial measures to support the economy. His remarks at the media conference on 25 March best reflect in the original what is at stake and how important it is for everyone to work together concisely during this period.
Federal Councillor Maurer: “The Federal Government is making 20 billion loans available for guarantees. It is a matter of finding a balance between the economy and the financial centre so that this can be achieved. That’s much more than just distributing money, it’s about securing financing, which is why you see the National Bank here [points to SNB president Thomas Jordan on the podium], it’s about ensuring supervision [points to Marc Branson, director of the Swiss Financial Market Supervisory Authority Finma], and it’s about showing how this money should be distributed [points to Martin Scholl, president of the Zurich Cantonal Bank, as representative of the banks]. After last Friday, I received e-mails from citizens who said: You were bluffing. I went to the bank. They told me that they had lost their heads in Bern, and that it will take at least four weeks before we are able to respond to such requests. Well, we have been working all weekend, really at 18-hour intervals, on the one hand the administration, our lawyers, on the other hand the banks, and today we have passed the regulation, with all the details that are necessary to be able to make these loan applications tomorrow and to make it work”.
Moving ahead rapidly together
Federal Councillor Maurer continues: “When all the CEOs and all the chairmen of the boards of directors of 300 banks in Switzerland are involved in a telephone conference on Sunday morning, you can see how seriously this is taken and how we work together in Switzerland. I think that’s the big difference. In other places, people are willing to throw a considerable sum of money into the bout. We provide them with the details of how to distribute it and how to control it a few days later.
I would like to take this opportunity to express my sincere thanks for the work that has been done here in the administration, at the National Bank, at Finma and above all at the banks. […] This simply shows that we have a functioning system, and when it comes down to it, you sit down together and you solve the problems.
What does the package look like? It is based on what the Federal Council decided last week. There are guarantee credits of up to 500,000 francs, which are in principle granted and paid out immediately without much scrutiny. The interest rate on these loans up to 500,000 francs is 0 (zero) and there are no fees. This, too, is a service provided by the banks that have been involved: People who get a guaranteed loan pay no interest. The second pot that we have announced goes from 500,000 to 20 million, where an interest rate of 0.5% is charged, because more clarifications and more support are needed. The benchmark is turnover, so that we treat everyone as equally as possible. This eliminates start-ups that do not yet have a turnover, that have not been in business for a long time. We have also provided a solution for this in the regulation, so that even very young companies that are already experiencing difficulties can benefit from a guarantee by making an estimate”.
Mutual trust between population and government as the best remedy against abuse
“The question that is asked most often”, says Ueli Maurer, “is after the abuse: What do you do when someone comes and wants something without having a claim? The moment someone signs an application, he acknowledges that he may be fined up to 100,000 Swiss francs if he gives false information. I assume that people who have a company, people who have put all their assets into that company, are also honest enough not to try to rip off the state. We don’t want that either. We immediately open up all possibilities for you, and I am basically convinced that abuse is practically impossible.
So much for the broad concept of this regulation. It’s a package of 20 billion, an emergency aid. It’s probably not the end of the line. There are bigger companies that may have liquidity problems. That is on our radar, we are looking into that, and the issue of hardship cases that cannot be solved with a guarantee is also on our radar. We will continue to look into these matters and will tackle them step by step.
It is wonderful working here with us, by the way. Every day we receive suggestions from the population, from cantons, from people, written and drawn by hand, concepts of how it could be done. It is simply wonderful how the people here participate and how they get involved.
We would like to point up this balance between the economy and the financial centre: What needs to be done to ensure that what we are launching now is also sustainable in the long term? That it has an effect on the economy as a whole without placing an undue burden on the financial centre.”
Overcoming this difficult phase together
Finally, a quote from the statement by Martin Scholl, president of the Directorate General of the Zurich Cantonal Bank:
“There are many announcements around the globe, but to announce large sums of money as quickly as possible is one thing, and bringing them to the beneficiaries is another. Ultimately, it is important that the money flows, that the wages are paid and that this difficult phase is mastered together, and quickly. The Federal Council promised a few days ago that it would deliver, and it has done so. With the decision of the Federal Council this morning, the solution is ready, not only conceptually but also in terms of implementation. This was only possible, the Federal Council said, because on all sides, practically in a 7x24-hours mode, on the basis of mutual trust and respect, solutions were being fought for, sometimes argued about”. •
(Translation Current Concerns)
In the medium term, i.e. over an economic cycle, the federal budget is balanced with the debt brake: surpluses must be generated during a boom to offset the deficits of the subsequent recession. Expenditure is limited to the level of structural, i.e. cyclically adjusted, receipts. This allows for a steady expenditure trend and prevents a stop-and-go policy.