Abstract Switzerland’s Federal Council proposed the Entlastungspaket 27 (“Relief Package 27”), a predominantly expenditure-side federal budget relief package, in response to rising defense needs and shrinking fiscal space. In the parliamentary process, however, the package was substantially scaled back. We show that under the parliamentary version of the package the projected financing balances remain negative, real federal expenditure grows faster than real GDP, and the package does not imply a contractionary fiscal stance. Thus, the Relief Package 27 may slow expenditure growth, but it does not amount to substantive consolidation. If Switzerland is to remain compliant with the debt brake, higher defense spending cannot be financed durably on top of existing spending commitments, but primarily through further reprioritization within the federal budget. Beyond Switzerland, this case illustrates the fiscal trade-offs that arise when new security priorities meet rigid expenditure structures under a credible fiscal rule.
Schaltegger et al. (Tue,) studied this question.