Interview: Thomas Schlittler
The ETH economist is surprised at how well Switzerland has survived the past two years – and explains why other countries have had more problems.
SonntagsBlick: Mr. Sturm, there has been a state of emergency for two years. Where is the Swiss economy compared to February 2020?
Jan Egbert Sturm: We came through the crisis much better than many economic experts thought possible. There were painful cuts, but the really big upheavals didn’t materialize. Compared to the oil crisis of the 1970s or the financial crisis, the economic impact of Covid was surprisingly small. The crisis has never called our economic order into question.
Other countries have suffered more. Why did Switzerland come through the crisis so well?
We have benefited greatly from our economic structure. The financial sector has an important share in the service sector. Many activities could be relocated relatively easily to the home office. In addition, important industrial sectors have proven to be resilient and resistant to pandemics, above all the pharmaceutical sector.
What role did the federal measures play?
In contrast to the governments of other countries, the Federal Council has never paralyzed the entire economy. Production continued in construction and industry. That helped to keep the economic damage within limits. The state support measures were also very effective, in particular the short-time work compensation and the Corona loss of earnings. As a result, the existing structures could largely be maintained.
Wasn’t that the case in other countries?
Not everywhere and not to this extent. The USA, for example, which is not familiar with the instrument of short-time work, found it much more difficult to start everything up again. There, many workers who were laid off because of the crisis have moved away or have reoriented their careers. As a result, there was also a huge shortage of workers in logistics, which in turn exacerbated supply chain problems.
But there are also problems with recruitment in Switzerland. The hotel and catering industry, which suffered particularly from the Covid measures, are complaining about a lack of staff. How come?
In Switzerland, the pandemic has certainly left the most marks in these areas. Despite state support, some companies could not afford to keep their staff. And now that you need people again, they don’t just come back to the mat. Here, too, some have probably migrated to other sectors and regions. But that should level off again. The hospitality industry will recover.
That all sounds very positive and optimistic. However, some pubs, hoteliers, gym operators and organizers should almost burst their collars when they read this. Many had to use up all their savings in the past two years or even went bankrupt.
Of course, you are right. The aggregated data for the entire economy should be treated with caution from an individual perspective. An average view does not mean that everyone is doing well. There are not only huge differences between the various sectors, but also between individual companies. In the mountain areas, for example, many hotels have had good months. In cities like Zurich or Geneva, on the other hand, the hotel industry is still in crisis.
Who will struggle beyond the pandemic?
The greatest uncertainties are in aviation and city tourism. Companies have almost completely canceled business trips during the pandemic, apparently without major consequences. I therefore assume that it will be a long time before the pre-crisis level is reached again in this area. The change in demand is likely to lead to structural adjustments there as well – and that is of course always brutal for those affected.
The unemployment rate is currently 2.6 percent, which roughly corresponds to the level at the end of 2019. However, the number of long-term unemployed has more than doubled, from 14,000 to 30,000 people. For what reason?
It is typical for long-term unemployment to rise during a recession. In addition, the maximum period for which daily allowances can be drawn has been extended, which means that fewer people than usual have been excluded and have disappeared from the unemployment statistics. In addition, employers are increasingly looking for workers with other qualifications. The shift to working from home, for example, has further increased the demand for IT specialists. But there are not suddenly more such specialists. This is a challenge that the economy was facing even before Corona and that will also require efforts in the future.
Rising prices are causing unrest in the EU. In December, the inflation rate was more than five percent. How do you rate that?
The strong rise in prices in Europe and the USA is primarily a consequence of the global supply bottlenecks and the development of energy prices. I therefore assume that this is a largely temporary phenomenon. As soon as the supply can meet the increased demand again, the inflation rate should also fall. From an economic point of view, however, slightly increasing prices are definitely desirable. In the long run, it is not good if we have no or even negative inflation, as in the past few years.
In Switzerland, the rate of inflation has never exceeded 1.5 percent in recent months. Why are we a special case in this regard?
One reason is the strong franc, which makes imports cheaper. However, energy prices also play an important role. Higher crude oil and gas prices have less of an impact in Switzerland because our economy is not very energy-intensive. Compared to German heavy industry, the energy costs of Swiss banks, insurance companies and pharmaceutical companies are much less significant.
Finance Minister Ueli Maurer repeatedly warned during the crisis that the costs caused by Corona aid measures will continue to burden many generations. How do you see it?
In international comparison, Switzerland’s national debt is still very low. We will be able to repay our debts without any problems. I’m not so sure about other countries though.
In the summer of 2020, you brought up a crisis profits tax to finance the costs of the pandemic. They didn’t just make friends that way. How do you rate the idea today?
It was important to me that in extraordinary situations people think outside the box and discuss extraordinary measures. The idea was intended as food for thought. In retrospect, however, it can be said with certainty that Switzerland will not need such an additional source of income – fortunately.
Top European economist
Jan-Egbert Sturm (52) has headed the KOF Economic Research Center since 2005
of the ETH Zurich. The word of the native Dutchman carries weight: in 2021 he reached third place in the “NZZ” economist ranking, and there is also a storm
in the Swiss Corona Task Force. He is married, has two children and lives with his family on Lake Constance.
Jan-Egbert Sturm (52) has headed the KOF Economic Research Center since 2005
of the ETH Zurich. The word of the native Dutchman carries weight: in 2021 he reached third place in the “NZZ” economist ranking, and there is also a storm
in the Swiss Corona Task Force. He is married, has two children and lives with his family on Lake Constance.