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ZURICH/BERN, April 14 (Reuters) – Switzerland’s
tradition of dependable consensus politics has taken a battering
after the government used an emergency law to push through a
state-backed mega-merger of UBS and Credit Suisse
, sidelining the country’s parliament.
Switzerland’s two parliamentary chambers voted to reject the
government’s 109 billion Swiss francs ($122.82 billion) in aid
for the deal between the country’s two biggest banks, delivering
a slap in the face for government.
The defeat is symbolic as it cannot change the merger, but
it is a blow for the government in an election year and makes it
harder to build broad support among the population for the
biggest corporate rescue in Swiss history.
The use of emergency laws, in which shareholders and
parliamentarians have no say, will also damage the standing of
Switzerland’s financial industry abroad, analysts have said,
especially as it faces rising competition from other financial
centres like Singapore.
The Swiss political model is under pressure at the moment,
said political scientist Michael Hermann, a director of
pollsters Sotomo, adding that the foreign perception of
Switzerland as business friendly and as a financial safe haven
could be undermined.
“Legitimacy in Swiss politics has been weakened, People who
worried about an over powerful government during COVID will see
their fears confirmed,” said Hermann.
“This is damaging for the trust in democracy – parliament
says no, but the emergency credits still go through.”
A recent Sotomo poll showed two thirds of the population was
against the UBS takeover of Credit Suisse, while a third of
respondents were angry that emergency laws had been used to
bypass parliament.
The affair has already boosted support for populist right
wing groups like the anti-immigrant Swiss People’s Party (SVP)
and the libertarian Aufrecht Schweiz movement in local elections
since the takeover. Both parties are looking to make gains in
national elections in October.
PARLIAMENT ‘CIRCUMVENTED’
The Credit Suisse/UBS merger marked the first time that
parliament had withheld its support for emergency laws designed
to deal quickly with crises.
The facility to act without parliamentary approval,
introduced in 2000, was used during the COVID pandemic to
enforce restrictions and again last year to provide a Swiss
energy producer with a credit line.
In the lead-up to the UBS/Credit Suisse merger last month,
Swiss emergency law allowed a sub-group of six members of
parliament to approve a cabinet plan to give financial aid on
behalf of the legislative body, angering the almost 250
lawmakers, who were left without a say.
Swiss Finance Minister Karin Keller-Sutter defended the use
of the emergency powers, saying Switzerland was not an
“emergency dictatorship.”
“We don’t do it for fun. We really didn’t know what else to
do,” Keller-Sutter told parliament during a stormy emergency
session this week. “The emergency law is based on the federal
constitution and I don’t think it’s correct to say it’s
illegal.”
Lawmakers were dismayed.
“It has not been a great moment for Swiss democracy. It is
terrible parliament has been put in this position and basically
circumvented,” said Roger Nordmann, leader of the Social
Democrat group in the Swiss lower house told Reuters.
The Swiss government said it would take into account the
rejection by parliament, but stressed the success of the
takeover of Switzerland’s second biggest bank – intended to
prevent a financial meltdown – was paramount.
Industry experts said the deal was unlikely to be changed by
politicians, with UBS being given a free hand to determine how
many jobs will go and what will be done with Credit Suisse’s
valuable domestic retail banking business.
Swiss media has reported that the takeover could result in
the combined bank cutting its Swiss workforce by up to 30%,
which could cost 11,000 jobs.
“Despite the anger, most policy-makers do not want to
interfere in the merger, to create and bear the risk that the
merger does not succeed,” said Hans Gersbach, co-director of the
KOF economic research institute at ETH Zurich.
“Politicians might have wanted to show their disapproval
about what happened, but they don’t want the UBS takeover to
fail.”
Ultimately, 209 billion Swiss francs are being provided as
state and central bank guarantees and support in the plan drawn
up by the seven-strong Swiss cabinet, which has members from
four political parties.
The amount is equivalent to around a quarter of
Switzerland’s entire economic output, and includes emergency
liquidity injections and a state pledge to absorb up to 9
billion francs in losses incurred by UBS, based on documents
outlining the deal.
Peter Kunz, an expert in economic law at the University of
Bern, said the lawmakers were ultimately powerless to change it.
“In Switzerland, we often pat ourselves on the back for
having the oldest democracy in the world. Yet seven people
decided on 250 billion francs of support, an unimaginably huge
sum of money,” he said.
“And the parliament has no say in the matter. The use of
such emergency legislation, overturning antitrust rules, is a
problem for Swiss democracy and rule of law. It calls Swiss
democracy into question.”
($1 = 0.8875 Swiss francs)
(Reporting by John Revill, additional reporting John O’Donnell.
Editing by Jane Merriman)
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