Daily Archives: February 11, 2014

It could be tempting for the rest of Europe to dismiss Swiss voters as irrational after Sunday’s referendum. The vote results in a constitutional amendment that will control immigration, including from EU countries, violating the terms of Switzerland’s treaty with Brussels. Yet to dismiss Swiss voters in this way would be a mistake.

The outcome of the vote is a blow for the government. Hope of meaningful EU concessions will melt away like the late spring snow. A country situated in the heart of Europe now faces a stark choice. Will it continue to enjoy the prosperity that springs from an economy deeply embedded in Europe, and accept the partial loss of political sovereignty that comes with it? Or will it become once again the master of its own domain and accept lower living standards as it grows more distant from European markets? The government must enact legislation within three years to implement the constitutional amendment. There is little time left. 

Some market watchers, shaken by the eye-popping increases in China’s debt indicators, have concluded that a financial crisis is imminent. After all, countries whose debt ratios have risen by similar magnitudes in just a few years have all crashed soon after. China, they say, seen as no different.

Yet when analysts drill into the balance sheets of borrowers and banks, they find little evidence of impending disaster. Government debt ratios are not high by global standards and are backed by valuable assets at the local level. Household debt is a fraction of what it is in the west, and it is supported by savings and rising incomes. The profits and cash positions of most firms for which data are available have not deteriorated significantly while sovereign guarantees cushion the more vulnerable state enterprises. The consensus, therefore, is that China’s debt situation has weakened but is manageable.