Key Challenges

Disconnect between
Swiss identity, reality
Switzerland faced ongoing, interrelated challenges at the close of the current review period. There is a disconnect between Swiss identity and reality: an enormous share of the population is comprised of foreign workers and other migrants. Policymakers are struggling to implement popular referenda by navigating between a “responsive” (implementing the people’s preferences) and “responsible” (furthering the people’s common good under conditions of constraint choices) reaction. They also have to reform the pension system, establish a tax regime for enterprises that is EU-compatible, and find sustainable solutions for the relationship between the European Union and Switzerland.
Relationship with EU increasingly fragile
First, the country’s relationship with the European Union remains provisional and increasingly fragile. In the past, the realities of domestic politics made bilateral agreements the only practical solution as neither a policy of “going it alone” nor EU membership were feasible strategies. However, this bilateral solution is becoming increasingly untenable. While domestic conflicts about the future relationship between the European Union and Switzerland have not abated, solutions have to be found. The current strategy of muddling-through, currently successful, may become unsustainable in the future.
Conflicts over migration intensifying. Anti-immigration party strongest in country
Second, minimizing internal political conflicts fueled by migration has grown more challenging. The share of foreigners within Switzerland’s population is among the highest in the world. Immigration has stimulated economic growth. To sustain the high economic growth rate, it remains essential that the country continue to recruit highly skilled labor. An extraordinarily high proportion of elite positions in the economy and higher education are staffed by foreign workers. Foreigners are also younger than the average Swiss citizen. Consequently, they contribute far more to the Swiss pension system than they receive. Hence, they subsidize the Swiss pension system and contribute significantly to its sustainability. Nonetheless, immigration has prompted considerable concerns among Swiss workers about housing prices, jobs and the use of infrastructure (e.g., roads and public transportation). Swiss workers constitute the base of the right-wing populist Swiss People’s Party (SVP). Today, the SVP is among the strongest populist parties in Europe in terms of votes, representation in government and success in referenda. Notably, this political strength cannot be primarily attributed to xenophobia. At least in international comparison, Switzerland and some of the Nordic European democracies show a relatively low level of xenophobia. Even so, the SVP has been extremely successful in mobilizing xenophobic elements within the population.
More initiatives not completely implemented. Balancing “people’s will,” global norms
This points to another challenge. In recent years, a growing number of popular initiatives have been approved by voters but implemented incompletely or not at all. This failure to implement constitutional amendments derived from popular initiatives is not entirely new. Historical examples of provisions left unimplemented include the prohibition on absinth (1908) and ban on gambling houses (1920 – 1921). Notwithstanding, these precedents are few and the exponents of these initiatives were not in the political center. By contrast, the number of successful initiatives has grown in recent years and their advocates (e.g., SVP and related organizations) are politically powerful. Several recent initiatives remain only partially implemented because full implementation would violate international law, international treaties or economic requirements. This has put the administration in a difficult position: full implementation would violate international or economic norms, but partial implementation gives rise to accusations among right-wing politicians that the “will of the people” is not respected. In order to mitigate the conflict between responsive and responsible government, political elites must effectively communicate that the Swiss nation is – as all Western nations – at best semi-sovereign and that there are strict limitations on what the public can decide upon. However, such a communication strategy would clash with the self-image of the Swiss, who are immensely proud of their (perceived) independence and sovereignty.
Aging population stressing pension system
As in most other mature democracies, Switzerland’s pension system must cope with the challenges posed by an aging population. To date, the system has been sustainable and provides relatively generous pension payments. Nonetheless, without exceptionally strong productivity growth or a continuing inflow of young foreign labor, in the long run either the retirement age will need to be raised or the level of benefits reduced. After the failed pension reform, the government is under strong pressure to develop a new reform proposal that will gain the support of a majority of voters in a popular vote.
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