No. 151, May

KOF Director Jan-Egbert Sturm explains in an interview why, from an economic perspective, the conclusion of a framework agreement between Switzerland and the EU would have been desirable and what economic risks now loom after the failure of the agreement.

US President Joe Biden has started his term in office with plenty of momentum. But the 78-year-old is facing major challenges in what is the most severe economic crisis in post-war history – and his political and fiscal leeway is limited. The following is an interim assessment of the first 100 days of the Biden administration.

In April of this year, KOF and Switzerland’s Neue Zürcher Zeitung (NZZ) newspaper surveyed economists on the subjects of state aid during the coronavirus crisis and the future of public finances. There are hardly any economists who think that the debt brake should be applied very rigorously. There is also agreement among the 167 survey respondents that cuts in education, research and social security should be avoided. The level of government support is generally not considered to be too high.

At the beginning of 2015 the Swiss National Bank abandoned the franc-euro minimum exchange rate, triggering a deflationary shock. How did incomes and unemployment of workers with and without rigid wages react to this?

The Swiss economy reported a significantly better business situation in April than in the previous month (see G 14). The upward trend in the Business Situation Indicator, which has been ongoing since the beginning of the year, is thus continuing at an accelerated pace. Firms are also much more confident about developments over the coming months than they were in the previous month and at the beginning of this year.

While the decline in demand is constraining fewer and fewer companies, the availability of goods, inputs and supplies is now one of the most important restrictions. Among wholesalers, for example, about half of all businesses are affected.