According to a SwissHoldings survey conducted in 2009 across 80 of the largest multinational groups operating in Switzerland, there is considerable anxiety and uncertainty over the degradation of working conditions and ‘standard of living’ in general.

The erosion of banking secrecy is no the only illness affecting the health of the Swiss economy. Switzerland is also suffering from a variety of other problems, some of which of such a serious nature that many multinationals are re-examining the advantages of remaining in Switzerland.

Criticism is rising concerning the different tax regimes in operation in the different cantons, which compete to attract the multinationals and foreign holding companies.

This loose federated system is under attack by the European Union, of which Switzerland is not even a member; the EU considers it to be unfair competition.

The companies surveyed evinced anxiety over the uncertainty over the political direction Switzerland will take. The Swiss only narrowly voted for bilateral agreements with the European Union permitting the free flow of workers into Switzerland from any EU country, and the integration into the Schengen space. The result has been a stark degradation in the employment market, as well as precipitous rise in criminality and disorder. In all the major Swiss cities, open air drug dealing and violent crime has risen sharply, prisons and police forces are overwhelmed, and at the same time real-estate prices and rents have exploded as Switzerland welcomed 300,000,000 potential buyers onto its market. Previously, Switzerland’s laws forbid the acquisition of property by nonresidents.

Multinationals have often chosen to set up their European headquarters in Switzerland not only for tax advantages but for the standard of living it offered its expatriates — a major selling point in its global recruitment efforts. The decline in living standards, along with overcrowding, housing shortages, regular traffic jams, rising criminality and other social problems previously unknown here, are causing companies to reconsider their presence here.

A change in the tax structure may just be the last straw. Finance Minister Hans Merz (who was responsible for the UBS bailout) has proposed instead of changing the regime of cantonal prerogatives in taxation, to rather appease EU concerns by proposing to abolish or modify the statutes regulating domiciled or holding companies. The cantons would be forced to raise their taxation of these types of companies. The Swiss government has been doing a lot appeasing of foreign governments over the past year. In Switzerland the Federal government (following almost a Chinese-style model) is not elected by the people.

SwissHoldings director Peter Baumgartner laid particular stress on the fact that the large international companies are seeking ’above all a legal and fiscal stability,’ and that this stability is absent in Switzerland.

However the current problems affecting international companies based in Switzerland go beyond potentially shifting tax structures –which well-paid accountants have always been able to navigate– and overlap with the current problems facing almost every other Swiss citizen: and these problems, extensive in nature, will require a major change in direction of Switzerland’s currently mismanaged foreign policy and economy.

The Swiss employment market continued to deteriorate in the 3rd quarter with some sectors of the economy struck harder than others. The most jobs were lost in the luxury industries and watch making sector with the unemployment rate skyrocketing nearly 300% in a period of 12 months. Also the number of unemployed increased by roughly 150% over the same 12 month period. Workers in energy and real estate saw the number of their unemployed double over the past year.

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The luxury and watchmaking industries are undergoing some strong setbacks from slowing orders and several luxury brands have begun letting go employees. Top companies already began shedding jobs last autumn. Nonetheless, as often happens in downturns, some companies are also hiring as well. The paradox is that companies look at the business downturn as an opportunity to better optimize the company competitive position, firing less performing staff and hiring others. Continue Reading

According to diverse institutes and Swiss research centers, Switzerland will enter recession in 2009. The Créa – a macroeconomic institute based in Lausanne — is predicting growth of –0.6% for 2009. The Créa analyzed the deceleration of the economies in the USS and continental Europe and concluded that if emerging economies have so far avoided the consequences of the global financial crisis, they will not continue to do so for long.

Their opinions are not unanimously shared. The BAK and the KOF are predicting anemic growth of .7% and .3% respectively. The Seco – the federal government’s organism – has predicted growth of ‘less than 1%’. Credit Suisse analysts are predicting growth of roughly 1%, and UBS analysts say that growth in Switzerland in 2009 will be roughly 0.2%. (Whatever growth there may be, all commentators agree that is unlikely that UBS will contribute anything to it.)

The Swiss economy will take a big hit in 2009, say analysts, due to strong drops in exports, as well as to the inexorable rise of the Swiss franc, as flight from less fiscally reliable currencies creates a run up in the national currency. The decline in exports and the ensuing decline in company order

books is likely to result in more unemployment and less consumer spending, meaning that jobs in Switzerland may be fewer and work may be less well paid.

Pundits say that the economy will not return to health until 2010, when growth is expected to rise above 0.5% and job growth should recur (the BAK predicts 1.7% growth for 2010). The optimism for 2010 is partly attributed to the Swiss Federal Government’s generous gift of more than $60 billion of public money to UBS, to stave off their bankruptcy and prop up their ledgers, in return for which the public will have a claim on just under 10% of the Bank’s stock should they return to health.
Economists and commentators are deducing that if the Federal Government is willing to hand over in cash about 20% of the entire market capitalization of UBS in return for 10% of the stock, this must mean that Swiss government is willing to spend prodigally to get the country out of the crisis.

The other signs that are encouraging analysts is the real estate market, which has so far been largely spared of a large speculative bubble, and Swiss industry.
The same analysts now conclude that the financial sector, which previously provided a large percentage of work in Switzerland, will decline to roughly 2% of Swiss jobs by the end of next year. For the Lausanne – Geneva axis, the BAK predicts a growth of 1.9% this year and 0.7% in 2009. According to the same analysts, jobs in the luxury watch industry will continue to grow due to new demand from emerging economies, though the growth will be less dramatic than the double digit growth experienced over the preceding years.