FEDERALISM AND CORONAGRABEN: WHY SWITZERLAND IS GETTING COVID WRONG

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As parts of Switzerland introduce soft lockdown measures in a battle against an autumnal wave of coronavirus significantly worse than the first, C Permit holder MATTHEW FEARGRIEVE considers the role of federalism in Switzerland’s culture and politics, and how it is hobbling the country’s response to the Second Wave.

A Cross atop a mountain in the Swiss Alps

In March this year, just as the pandemic was making its first impact in Switzerland, we reported in this blog how export chief Stefan Brupbacher typified the fabled Swiss work ethic and likely response to the virus, as he called on the Swiss government simply to distribute face masks so the population could carry on working (“Es braucht dringend die Abgabe von Masken”).

Brupbacher’s remark was notable for several reasons. Both its sentiment and its being made in the German language evidenced a deep-seated cultural divide that has always existed in Switzerland, between the country’s German-speaking lands (cultural stereotype: hard-working and economically successful) and the French-speaking (easy-going, and poorer).

Back in March it would have been hard, right at the start of a ride into the unknown, when Europe was just starting to introduce lockdowns, to imagine an official in the francophone regions of Switzerland sticking his neck out and similarly asserting: Everyone Keep Working.

So Brupbacher came to personify, at that moment in time, the typical response of the German-speaking cantons to the virus: sensible precautions to be taken, but the economy to be kept going. And, throughout the Spring and Summer, it looked as if Switzerland, like Sweden, had got it right.

Fast forward to November. The Second Wave is moving through Europe. And in Switzerland, the epidemiological situation is, astonishingly, dividing itself along the same old geographical and cultural lines: Swiss-German on the one hand, and Suisse Romande on the other.

Healthcare Crisis

Geneva recently established itself as Europe’s biggest COVID hotspot, in terms of newly reported coronavirus infections. As hospitals in Suisse Romande (broadly speaking, the francophone cantons) have steadily filled with COVID patients throughout October and November (more than a thousand in Geneva alone), and as pressure mounts on intensive care facilities, health officials have stated that COVID cases are four times higher in this region than in the German-speaking cantons.

Hospitals in Geneva, Vaud and Valais (the principal francophone cantons) are already postponing routine medical procedures, such as heart and cancer treatments, to free beds for the growing influx of virus patients.    

True, these differences can be explained in demographical and geographical term. Geneva, for example, has a relatively high population density, and suffers because of its proximity to the French border, across which there has been relatively unrestricted passage of people and goods throughout the year. Municipal elections in Valais and the Bénichon Festival in Fribourg are also thought to have contributed to the increase in infections in these regions.

But the fact of life in Switzerland right now is that the good people of the German-speaking cantons are enjoying meals in restaurants and drinks in bars, whereas their compatriots in Suisse Romande are effectively locked down, with eateries, bars, shopping and entertainment venues, and other “non-essential” businesses, all closed.

A Divided Country

Swiss natives and foreign expats alike are familiar with the term röstigraben, a culinary allusion to the cultural differences between French-speaking and German-speaking Switzerland. And so, as the impact of the virus divides itself along the same lines, a newly coined term -  coronagraben -  is gaining rapid currency as a pointed and deeply symbolic means of referring to those regions of the country that are suffering the most.

Switzerland’s federalism is a key component of this cultural and epidemiological division. It is this federalism that enables a French-speaking official in Suisse Romande to force businesses to close, whilst her German-speaking counterpart, in the canton five minutes down the road, sits in a restaurant and eats cheese fondue.

The cantons enjoy autonomous, decentralized powers in social and economic matters. The handling of the pandemic is no exception.

One painful corollary of this cantonal autonomy is the assumption of full responsibility for the economic consequences of any lockdown or other restrictive measures that a canton’s officials decide to impose. And this economic pressure places the poorer, francophone regions in a uniquely impossible position. Just at the moment when they need to keep their local economies going, the risk of pressure on hospital beds (quality of healthcare being, in truth, as uneven across Switzerland as it is in other countries) forces local governments to impose a shutdown. Whereas in the richer German-speaking cantons, a combination of fuller coffers, better-equipped hospitals and more hospital beds, enables life to go on largely as normal.

This state of division is a consequence of Swiss federalism. The stark-  and growing- difference in quality of life between the röstigraben and the coronagraben is placing this model under mounting pressure.

Swiss Federalism in Crisis

Traditionally, fiscal federalism has fuelled fierce tax competition between the cantons. After all, brotherly love was never the prime motivation when the cantons chose to federate. But there is now a growing recognition in Switzerland that central government needs to step in, and implement a consistent and coordinated crisis response, applicable across all cantons and administrative regions.

But such a centralized initiative would run contrary to a venerated credo in Swiss life...

Business is Business

This was the driver behind Stefan Brupbacher’s prophetic utterance in March, and why the Swiss government has – astonishingly – been pleading poverty as a countervailing argument against the imposition of lockdowns. So we had Finance Minister Ueli Maurer asserting that the country simply cannot afford a second lockdown: “We don’t have the money for it”.

The numbers suggest otherwise. Switzerland’s debt-to-GDP ratio stood at just 41% in 2019, but the government reckons that the drop-off in economic activity in 2020 will force the issuance of sovereign debt to the tune of CHF22 billion (equating to 3% of GDP). By comparison, fiscally frugal Germany is planning to print debt worth 6.4% of its GDP, to finance its fight against the virus.

There has been remarkably little pushback against this fiscal rhetoric from the mainstream media and political circles in Switzerland. No political party or senior politician (committee men, all of them) has publicly called for the introduction of a centrally-led lockdown. It took a petition in early November by fifty Swiss economists to focus some pressure on the lockdown issue. The petition reasons that, whilst a lockdown causes economic loss, the bigger picture is that  “the economic costs of a pandemic staying out of control are borne later, as the economy stalls, and spreads to other sectors”. The economists opined that what Switzerland needs is “a swift second lockdown”.

The petition is dated 2 November. The terms of the cry to action voiced by these economists are unequivocal. The government’s response? More federalism. Cantonal authorities to impose “soft” lockdowns, on their own terms.

The Federalist Flaw

Now, to be fair, the government of Switzerland faces the same pandemic challenge as most other administrations worldwide: do we lockdown, or do we stay open and keep going?

The answer is clearly not as easy as Mr. Brupbacher thinks it is. The differentiator in Switzerland’s case though, and the real problem here, is that its government cannot see the challenge for the federal trees. Individual cantons cannot and should not be expected unilaterally to select and implement an holistic COVID strategy. The cantons need to act cohesively as one body, and to implement a uniform approach to lockdown, coordinated by central government.

As the economists’ petition points out, the stakes could not be higher:

There seems to be a pervasive misunderstanding regarding the economics of COVID-19: an argument is often made as to the economic costs of a lockdown, invoking a tradeoff between the economy and health. In our opinion, and especially in the kind of situation Switzerland is in now epidemiologically, this is a false dichotomy: there is no such trade-off. The choice is between 1) a big recession, overwhelmed hospitals, and many excess deaths under current policies; and 2) a big recession with fewer deaths and a manageable health system under a second lockdown.

Matthew Feargrieve is an investment management consultant

Matthew Feargrieve is a C-Permit holder and investment management consultant. You can read Matthew’s personal blog here, and his business blog here. You can see his Twitter feed here.  

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