Switzerland's Terminal Pain/Profit
Surging cheese imports, two bilateral deals and a hard woman
Dear Insider,
Switzerland’s biggest defence are its mountains.
The impassable Alps, the hidden tunnels and the imposing labyrinth of well-concealed armaments make Switzerland formidable for any foe.
And there are the skies.
The European air defence agreement, signed by Viola Amherd for Switzerland this week, aims to fill that gap as well.
It also highlights - once again - the keen balance between “short- and long-termism” that is played by Switzerland’s highest officials.
With consequences for the lowliest of its citizens.
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Quick hits:
🛡Airing with Austria
Switzerland's Defense Minister, Viola Amherd, has signed a declaration of intention along with Austria to participate in the European air defense system "Sky Shield." The agreement, signed in Bern, aims to strengthen cooperation between the two countries in defense research, joint air defense, and foreign missions. Switzerland, while emphasizing its neutrality, aims to enhance its defense capabilities through this initiative and contribute to the coordination and improvement of air defense in Europe.
😳 Bad big boy
Thomas Gottstein, the former CEO of Credit Suisse, is reportedly a target in enforcement proceedings conducted by Finma in relation to the now infamous Greensill case. The bank was found to have seriously breached its supervisory duties and failed to record risks over a number of years, according to a scathing report published by the Swiss Financial Supervisory Authority (Finma) in February. The enforcement proceedings could result in serious penalties such as professional bans for individuals and license revocations for the bank.
🔨Not out of work
In Switzerland, approximately a quarter-million job positions remain unfilled, according to the staffing firm x28. The health and construction sectors have the most job vacancies, especially for nursing staff and tradespeople. Among Switzerland's cantons, Zurich and Bern have the highest number of open positions, while Uri and Appenzell Innerrhoden have the fewest.
🥛Mad about milk
Switzerland is set to import more cheese than it exports for the first time this year. The president of the Swiss Milk Producers Association (SMP) attributes this shift to the rapid reduction in milk farms and the lack of profitability due to low milk prices. The liberalization of the milk sector in the 1990s has contributed to this changing dynamic, with milk farms shrinking at twice the rate of other agricultural businesses.
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💡The Point:
👉 Switzerland continues to grapple with its place in the global economy. That economy, while less inter-connected and inter-dependent than it was before the pandemic, is still far bigger and broader than Switzerland itself. Small players must always come to grips with their “smallness” - in one way or another. As the cheese industry example clearly shows - a liberalization of regulation and competition rules may temporarily boost an industry, while later ushering in adverse effects.
Protecting its “borders” in the economical sense remains a top priority for Switzerland and politicians today will take warning from the lessons of the past. Expect the government to play a bigger role in propping up specific sectors that may face hard times under global pressures.
👉 Austria and Switzerland are neighbours, but not particularly chummy ones. With a heavy industrial focus and a penchant for attracting the wealthy of much larger countries, Switzerland has long been more oriented towards France, Germany and to a lesser extent Italy. But Viola Amherd is right to consider Austria an important partner on topics such as defence. Since Austria also considers itself a neutral country, the timing of their ascension to Sky Shield - and their terms - are important.
With smaller, more conservative countries banding together and clearly expressing their common interests - an initiative such as the Sky Shield may prove to be a blueprint for future areas of manoeuvre.
Viola Amherd is right to consider Austria an important partner on topics such as defence.
👉 For former Credit Susse executives, the story will not be over for a long time yet. While they may have faded from the public eye, Thomas Gottstein, Tidjane Thiam and Brady Dougan will face the final bill for their (in)actions. Ironically enough, it may not be a court of law that causes them the most trouble. With a dark cloud of incompetence and irresponsibility hanging over them, all the major figures - including former chairman Urs Rohner - will have trouble doing any major business again.
Brady Dougan’s failing Exos Financial is just one example. The long-term effects of short term greed are clear.
💡The Insider Angle:
There is short-term pain and long-term health to be considered in recent events.
At the risk of being derided for “blowing up” Swiss neutrality, Viola Amherd has taken a pragmatic approach to defence cooperation with Europe. That should point to a long-term commitment towards shared values with the EU.
In exchange, it may be expected for Switzerland to use its steps forward to negotiate better “defence” for its industries. Here Amherd’s Mitte party will have no chance of getting around a protectionist attitude as pushed by the far right in parliament.
Meanwhile, in Germany, major newspapers continue to criticize Switzerland for its so-called “egoistic neutrality”. Germany’s conscience may be convicting it, however, since its own failure to maintain its military - and its Russia-friendly economic policy - have been one reason that Europe was generally caught napping by the Ukranian invasion.
Switzerland’s pragmatism may seem short-sighted at times - and the long-term consequences turn out differently than expected, as the cheese industry shows.
But pragmatism also pays. Energy Minister Albert Rösti scored a big win by signing a gas-supply agreement with Italy. Germany and France will realize again that they have been played by quiet Swiss diplomats.
The agreement also underscores how a piece-meal, step-by-step approach - while not perfect - still allows Switzerland to balance the short and long-term with astounding success.
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➕The Bonus:
🎉 Party’s on - ZuriFest, the largest annual festival in Switzerland has begun, with high temperatures (and high emotions) expected. (Link)
🔥Bahn burning - A local Zurich train caught fire this week, leading to chaos in public transport. (Link)
🏷 (Un)fairly paid - A new association wants to force the country’s two largest retailers - Coop and Migros - to pay fairer (higher) prices for produce. (Link)
