(Bloomberg) --
A Swiss fiscal package to counteract the effects of the global downturn isn't necessary, according to the government's chief economist.
Switzerland's economy lost steam in the second quarter and is likely to slow further because of the strong currency, fallout from the trade war and weakness in Germany. Yet Eric Scheidegger, who heads the country's State Secretariat for Economic Affairs, said that while a technical recession cannot be excluded, a severe one is unlikely. When it comes to additional government spending, the devil is in the details.
The country's track record since the 1990s shows that using fiscal policy to boost demand “has limited effect,” Scheidegger said at a press conference in Bern on Thursday. Given that Switzerland is a small, open economy “it's very difficult to use state impulse programs to convince consumers to spend more.”
With Germany, Europe's largest economy, teetering on the brink of recession, calls are mounting for the government in Berlin to boost spending to offset the slowdown, notably by improving infrastructure. Speaking in Brussels this week, European Central Bank President-designate Christine Lagarde joined the chorus by calling on countries that had the fiscal space to use it.
Yet the German government is cautious, and the notion of loosening the purse strings has also met with skepticism in Bern.
Read More: In a World Drowning in Debt, the Swiss Aren't Spending Enough
“If you look at Switzerland's infrastructure, we look very good in international comparison,” Scheidegger said. With public construction projects taking a long time between design and fruition, from an economic perspective the question arises, “How quickly do they have an effect?”
To contact the reporter on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Brian Swint, Zoe Schneeweiss
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