As a former member of the Council of States for the Canton of Zurich, I observe the economic policy of the predominantly center-right Federal Council with growing concern. Swiss companies are in the midst of a global storm: wars, punitive tariffs, the AI revolution, demographic change, and expanding regulation are putting them under pressure. In such a situation, the government’s top priority should be to defend the competitiveness of the business location. Instead, the Federal Council, in its eagerness to level the playing field, is squandering the very strengths that have distinguished Switzerland in international competition for decades.

Regulatory restraint, strong legal certainty, low regulatory costs: the Federal Council is sacrificing these advantages lightly and without necessity, effectively sawing off the branch on which the Swiss economy sits.

Swiss competitive advantages are eroding

The Swiss economy pays wages that are 50 to 70 percent higher than the European average, while also bearing exceptionally high costs for rent and infrastructure. This structural disadvantage has so far been offset by other strengths: a highly skilled workforce, favorable financing conditions, low taxes, and lean regulation. However, these advantages have gradually eroded in recent years – or are even being actively dismantled.

The tax advantage between the city of Zurich and Frankfurt has practically disappeared at income levels of around 150,000 francs. The OECD minimum tax has largely leveled the playing field in corporate taxation. The unilateral introduction of stricter capital requirements under Basel III has further increased financing costs for companies in Switzerland, with noticeable effects on investment and growth.

Another cost driver is already on the horizon: in a few weeks, the Federal Council will present a further tightening of capital requirements for internationally active banks.

Shortly before Easter, the Federal Council also launched a consultation on the indirect counterproposal to the second corporate responsibility initiative. Here, too, it aligned itself with EU law, in some respects even going beyond it. Corporate liability entails additional bureaucratic and financial burdens for Swiss companies, the effectiveness and benefits of which remain highly controversial even within the EU.

The pharmaceutical sector is also under pressure: US tariff policy is hitting the industry hard, new reference pricing rules disadvantage small markets such as Switzerland, and the market launch of innovative medicines is becoming increasingly unattractive for manufacturers. Access to new therapies in Switzerland has already demonstrably worsened, with a downward trend. The Federal Council has set up a working group and promises the best possible framework conditions. It remains to be seen whether this group will succeed in improving the situation.

Standing still is not enough to move forward

Weakening the financial center, the pharmaceutical sector, and the export-oriented industry in times of global uncertainty – precisely those sectors that form the backbone of Swiss value creation – is reminiscent of Gottfried Keller’s Seldwyla: a community cheerfully sawing away at the foundations of its own prosperity without grasping the consequences. It raises the suspicion that parts of the administration and political sphere believe they can burden the economy indefinitely without repercussions.

A look at Germany should give us pause. In the 1990s, Germany was regarded as a model for an innovative industrial economy with strong performance. Today, the German economy is stagnating, and its innovation leadership has long been lost. Over two decades, Germany has failed to increase its value creation – and even standing still at a high level ultimately means falling behind.

Switzerland would be well advised not to repeat Germany’s mistakes, but instead to act strategically and consciously defend its competitive advantages.