The Swiss Debt Brake

How Switzerland's constitutional debt brake, approved by 85 percent of voters in 2001, requires balanced budgets over the cycle, and its effect on public debt.

Switzerland has a constitutional debt brake (Schuldenbremse).

Approval

Swiss voters approved it in 2001 with about 85 percent support; it took effect in 2003.

How it works

Federal spending is capped at revenue adjusted for the business cycle.
Deficits are allowed in recessions; surpluses are required in booms.
Over the cycle, the budget balances.

Results

Federal debt fell substantially as a share of GDP.
Switzerland’s public debt is low, among the lowest in Europe.

Flexibility

During COVID-19, extraordinary spending was allowed, with plans to repay it over time.

Comparison

Germany adopted a similar debt brake in 2009.
Critics say such rules can limit investment, but Switzerland’s version adjusts for cycles.

Lesson

Rules with cyclical flexibility can combine discipline and stability.

The boom surplus

In a strong year, higher tax revenue produces a federal surplus, used to reduce debt for future downturns.

Thinking fiscal rules forbid all deficits

The Swiss brake allows deficits in recessions.

Key takeaways

Voters approved the debt brake in 2001 with 85 percent support.
Spending is capped at cyclically adjusted revenue.
Federal debt fell substantially.
Germany adopted a similar rule in 2009.