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The following is the Executive Summary of the OECD assessment and recommendations, taken from the Economic Survey of Switzerland 2006 published on 6 January 2006.
While Switzerland is still a prosperous country, growth of per capita income has been weak and considerably below the OECD average for a number of years, mainly because of lacklustre productivity gains. In the absence of a significant pick-up in productivity, trend output growth will diminish further due to the ageing of the population, falling to as little as ½ per cent by 2020. At the same time, the dynamics of social spending are not sustainable in the long run. In this context, the authorities face two key policy challenges: raising growth performance and restoring better control over public spending.
Structural reforms are necessary to raise potential growth. The authorities, fully aware of this challenge, launched a growth package in 2004 which includes major advances, especially in the area of competition policy.
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In order to create a competition culture, it is important to go ahead with the package of measures proposed by the government, which includes a revision of the Domestic Market Act, eliminating regional and local obstacles to a unified domestic market, as well as reforms of the electricity and agricultural sectors. Reforms need to be accelerated in other domains, including telecommunications; and technical barriers to imports should be reduced by accepting products conforming to EU standards (the “Cassis de Dijon” principle). Finally, the resources of the competition authority should be increased and the political independence of its members ensured.
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Innovation performance needs to be maintained at its current high level to preserve the competitiveness of the economy. Key in this area is the improvement of framework conditions, including strengthening competition, simplifying administrative burdens, reforming the bankruptcy law and enhancing the efficiency of the university system. Efforts are also needed to better fulfil budget spending priorities on education and research and to bridge the gap between fundamental research and the market.
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Despite very high employment ratios, labour utilisation could be increased by reducing tax disincentives for mothers to work, developing early childhood education and care, better integration of the disabled by the reform of the invalidity insurance and removing disincentives to the participation of older workers.
Reforms are also required to restrain public and mandatory social spending growth, especially in the medical, disability and old age schemes, to put an end to the sharp rise in taxation and mandatory contributions recorded over the last decade.
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Greater transparency of the fiscal policy framework would enhance the understanding of problems and raise the population’s awareness of the need for reform – crucial in a system of direct democracy. This will require disentangling the finances of the Confederation, of the cantons and of the social insurance system while including all levels of government in a fiscal policy framework extending to the medium and long term.
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An overhaul of welfare programmes is also needed to stop the sharp rise in mandatory social spending. Plans to reform the disability scheme, which would intensify early screening and help people to get back to work, should be implemented rapidly. A tighter control of medical spending will necessitate a deep reform of the health care system. This could be achieved by a range of measures instilling greater competition among providers and improving provider payment methods. Finally, ensuring the funding of basic pensions, including beyond 2020, will require inter alia an increase in the average number of years spent in activity, in view of the likely continued increase in longevity.
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Return to the Economic Survey of Switzerland 2006
A printer-friendly Policy Brief (pdf format) can also be downloaded. It contains the OECD assessment and recommendations, but not all of the charts included on the above pages.
To access the full version of the OECD Economic Survey of Switzerland:
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Readers at subscribing institutions can go to SourceOECD, our online library.
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Non-subscribers can purchase the PDF e-book and/or printed book at our Online Bookshop.
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Government officials can go to OLISnet's Publication Locator.
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For further information please contact the Switzerland Desk at the OECD Economics Department at webmaster@oecd.org. The OECD Secretariat's report was prepared by Claude Giorno and Florence Jaumotte under the supervision of Peter Jarrett.
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