The Swiss Miracle?

Beyond Chocolate, Cheese, and Banking

From Ireland to Cyprus, the whole of Europe seems to be locked in economic and political crisis. But there is a small area of calm at the continent’s core: Switzerland.

Switzerland’s secret is that it is part of Europe -- and it isn’t. On the one hand, it is a signatory to the Schengen treaty, and thus delegates the protection of its borders to the European Union. It has had a free trade agreement with EU nations since 1972. Accordingly, it sends 60 percent of its exports to the EU and gets 80 percent of its imports from the EU. The country is a member of the Single Euro Payments Area (SEPA), which integrates the European financial industry, and its currency has been bound stably to the euro since 2011. At the same time, though, Switzerland is not part of the continent: it belongs neither to the European Union nor to the eurozone, so it makes its own fiscal policy and remains economically and politically independent.

Switzerland’s middle path is likely the reason why the country is doing so well. Between 2007 and the first quarter of 2012, its economy grew at a steady two to three percent per year, with a modest contraction of 1.9 percent at the peak of the financial crisis in 2009. GDP also shrank slightly in the second quarter of 2012, but is predicted to increase again by over one percent in 2013. In addition, the government is incredibly stable. The basic balance of parties in the executive branch has remained constant for the last 50 years.

Switzerland’s success stands in contrast to the struggles of many of its neighbors, which are still deep in recession, face deep social splits, and have governments that are fighting to hold on to power. That fact alone should make the Swiss case an object of international study. But, to date, it has not. The world only occasionally talks about this landlocked “island of the blessed” in the middle of Europe. And even then, the tales are mostly of morally problematic banking secrets or the imposition of the world’s strictest legal regulations for companies quoted on the stock exchange. But there is more to Switzerland than that. Underneath the country’s relative success is a unique political system, some elements of which Europe might do well to adopt.

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