Key Challenges

Disconnect between
Swiss identity, reality
Switzerland continued to face ongoing, interrelated challenges at the close of the review period. There remains a disconnect between Swiss identity and reality: a vast share of the population is comprised of foreign workers and other migrants. Policymakers are struggling to implement popular referenda, navigating between “responsive” (i.e., implementing voters’ preferences) and “responsible” (i.e., furthering the common good under conditions of constrained choices) execution. They must also reform the pension system, establish a tax regime for foreign enterprises that is compatible with the European Union, and find sustainable solutions for the country’s relationship with the EU.
Relationship with EU increasingly fragile
First, the country’s relationship with the EU 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 EU and Switzerland have not abated, solutions have to be found. The strategy of muddling-through, while currently successful, will eventually become unsustainable. An institutional framework agreement with the EU appears unavoidable, though there are no political majorities for such an agreement.
Conflicts over migration intensifying
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 the Swiss working- and middle-class about housing prices, jobs, the use of infrastructure (e.g., roads and public transportation) and national identity. Swiss workers constitute the base of the right-wing populist Swiss People’s Party (SVP).
Strong right-wing populist party in government
Today, the SVP is among the strongest right-wing 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 countries show a relatively low level of xenophobia. Even so, the SVP has been extremely successful in mobilizing xenophobic elements within the population.
More initiatives
This points to another challenge. In recent years, a growing number of popular initiatives have been approved by voters but implemented either 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 promoters 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 norms. 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.
Balancing “people’s will,” global norms
In order to mitigate the conflict between “responsive” and “responsible” government, political elites must effectively communicate that the Swiss nation – as all consolidated democracies – is at best semi-sovereign and that there are strict limitations on what the public can decide upon. Such a communication strategy, however, 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, the retirement age or tax revenue and pension contributions must be raised or the level of benefits reduced. The current remedy of a politically fragile tax-pension reform package could be easily terminated in a popular vote in summer 2019. Were this to occur, Switzerland would face serious challenges in its relations with the EU and with the sustainability of its pension system.

Party Polarization

Polarization hampering reform
Party polarization has increased since the early 1990s. Major reform processes – in particular with regard to adaptation to external constraints – have been stalled or made very difficult as a consequence of party polarization. (Score: 3)
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