Swiss Go to Polls on SNB’s Gold, Immigration in Economic U-Turn

Switzerland holds three referendums today that have the potential to have an effect on everything from the economy to the central bank and even the country’s international relations.

Up for a vote is a requirement for the Swiss National Bank to hold at least 20 percent of its assets in gold, a clampdown on immigration and the abolishment of tax privileges for foreign millionaires. While polls by gfs.bern indicate all three proposals could get rejected, there remains a sizable cohort of undecided voters.

Plebiscites are a key feature of Switzerland’s system of direct democracy, and are held nationally and at a municipal level several times a year. Campaigns in the run-up to the latest votes have seen factions throwing out accusations of xenophobia, while there have been warnings that the economy’s potential could be weakened and the SNB’s power neutered.

“Independent of the fact of a ‘yes’ or a ‘no’ on the votes, the message that is being sent abroad is that the Swiss model is not as predictable as we thought it would be,” said Stephane Garelli, a professor at the IMD business school in Lausanne.

While most votes are cast by mail before today, polling stations will close by 12:00 p.m. Zurich time and the first projections are due after 12:30 p.m. A final tally will be announced later in the day and the government will hold a press conference.

Political Toy

There has been a sharp increase in the number of initiatives in recent years, including a ban on construction of minarets, curbs on executive compensation and a minimum wage. Some in Switzerland argue direct democratic privileges are being abused.

“The constitution is becoming the toy of political exhibitionism,” Richard Saegesser, member of government in the town of Uster, near Zurich, said in a Nov. 23 speech.

The “Save Our Swiss Gold” initiative would require the SNB to build up its bullion holdings, currently about 8 percent of assets, over the next five years and forbid it from ever selling any. That would make it harder to defend its cap on the franc of 1.20 per euro and fulfill its price stability mandate. The central bank would have to buy about 70 billion francs ($73 billion) of gold, policy makers estimate.

‘Golden Leash’

The initiators of the gold proposal say the measure will strengthen rather than weaken the central bank’s credibility. They’re wary of the SNB having acquired tens of billions of euros by defending the cap it set in 2011.

“They’re basically putting a leash on th central bank,” Jan-Egbert Sturm, Zurich-based KOF Swiss Economic Institute, told Bloomberg Television on Nov. 28. “A dog which is being put on a golden leash, so to speak: it can still bark but whether it can still bite is not that clear.”

According to a Nov. 19 poll by gfs.bern, 38 percent are in favor of the proposal, 47 percent are against it, with 15 percent of voters still undecided.

Also on the ballot is “Halt Overpopulation -- Preserve the Natural Environment,” dubbed Ecopop. It would limit immigration to 0.2 percent of the permanent resident population over a three-year average, while forcing the federal government to devote 10 percent of its annual foreign development aid budget to voluntary family planning. Proponents say it will preserve the environment and quality of life, while opponents including the government have called it xenophobic and ineffective.

‘Free Lunch’

The measure is significantly more stringent than a successful February referendum to “Stop Mass Immigration,” which required the government to introduce quotas for newly arriving immigrants from European Union countries but didn’t specify how high they needed to be.

Under Ecopop, a net 16,000 newcomers would be permitted to move to Switzerland each year, including EU citizens, who currently don’t face restrictions.

“It’s really a U-turn,” said Alexander Koch, an economist at Raiffeisen Schweiz in Zurich. “If you want to restrict immigration, which is understandable, with such a harsh quota, it doesn’t come with a free lunch and of course businesses are already thinking about relocating investments or doing investments in other countries.”

According to the gfs.bern poll, support for Ecopop has risen to 39 percent. Still, 56 percent are seen opposing it and only 5 percent of voters are still undecided, the poll showed.

EU Relationship

People are concerned that “something will go wrong if things continue as they are, that Switzerland’s beauty and security is at risk,” said Michael Hermann, senior lecturer in political science at the University of Zurich, adding that accepting both the gold initiative and Ecopop would have “really wide reaching” consequences.

Opponents of Ecopop, including even the Swiss People’s Party that spearheaded the February vote, have said it will harm the economy by preventing companies from hiring skilled foreigners. It also risks causing frictions with the EU, the government has warned. Relations are governed by a series of bilateral trade agreements that could be nullified by the anti-immigration vote.

Ecopop appeals both to environmentalists and to opponents of immigration, said Patrick Emmenegger, professor of comparative political economy and public policy at the University of St. Gallen.

“Those are two different motives, but because these two camps are coming together that makes this radical initiative dangerous,” he said. Ecopop “will be the end of the bilaterals,” he said, without which the Swiss will face “big economic challenges.”

Tax Privileges

The third measure up for a national vote is a proposal to abolish special tax rates accorded to wealthy foreigners who don’t hold a local job. While Swiss citizens and job-holding residents pay tax on income, the so-called “forfait” is calculated via a multiple on the person’s annual Swiss rent. Beneficiaries include Formula 1 champion Sebastian Vettel and Russian billionaire Viktor Vekselberg.

According to the government, some 5,600 people benefit from the special tax regime, which already has been abolished in Zurich. More than half of forfait holders live in the French-speaking cantons of Vaud, Valais and Geneva.

While opponents of the forfait say it is unfair, the federal government favors keeping it, saying it benefits the economy and fosters job creation by attracting the wealthy. As many as 22,497 jobs are attributable to the tax privileges, a study by the federal tax office found.

Geneva, which boast a high number of wealthy foreigners, will also hold a local referendum today on abolishing the forfait within the canton.

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