Swiss Minister Warns of Risks from US and European Debt

Switzerland’s Finance Minister, Karin Keller-Sutter, has expressed concerns over rising debt levels in the United States and Europe, warning that they pose a significant risk to international financial stability, including Switzerland’s own economic security.

In an interview with the Swiss daily Blick, Keller-Sutter contrasted Switzerland’s prudent fiscal management with the mounting debts of other nations. She praised Switzerland’s “disciplined” approach to public finances, crediting it with enabling the country to effectively navigate the economic challenges brought on by the COVID-19 pandemic and Russia’s invasion of Ukraine.

However, she was critical of the financial state of other countries, citing France as an example of a nation “so indebted they’re hardly able to act any more.”

Keller-Sutter also pointed to the United States, describing it as a “time bomb” and highlighting the recent “mini-crash” on the stock markets in early August as a “warning shot” of potential economic instability.

“It was an expression of investors’ fear of a recession. Debt levels in the U.S. and Europe are a risk to international financial stability and a risk for Switzerland,” she remarked.

Keller-Sutter also addressed the ongoing discussions around Switzerland’s largest bank, UBS, following its acquisition of the collapsed Credit Suisse last year.

The Swiss government has proposed that UBS be required to hold additional capital to safeguard against future banking crises. Keller-Sutter defended the proposed capital requirements, stating they are essential to protect Switzerland from another financial meltdown.

UBS CEO Sergio Ermotti has publicly criticised the proposal, leading to questions about whether Keller-Sutter had engaged with him on the issue. She clarified that she had not been in contact with Ermotti, noting that the matter had entered “a normal political process.”

When asked about speculation that UBS might consider relocating its headquarters abroad if it finds Switzerland’s conditions unfavourable, Keller-Sutter was cautious. “The Federal Council (cabinet) believes it’s good for the economy to have a large Swiss bank. But the bank must decide for itself how it wants to position itself,” she said. UBS, for its part, has repeatedly affirmed its commitment to Switzerland.

Keller-Sutter’s comments underscore the delicate balance Switzerland faces in maintaining its financial stability amidst global economic uncertainties, while also navigating the complexities of managing its banking sector in a challenging international environment.