Radical Swiss financial reform campaign set for defeat

The majority of Switzelrand's cantons rejected the proposals. — Reuters pic
The majority of Switzelrand's cantons rejected the proposals. — Reuters pic

ZURICH, June 10 — A radical plan to transform Switzerland’s financial landscape by barring commercial banks from creating money when they lend looked set to fail, according to initial projections on Sunday.

Some 75 per cent of voters had rejected the so-called Sovereign Money initiative according to initial forecasts from pollsters gfs.Bern. A final result is expected around 1500 GMT.

The campaign appeared doomed after a majority of Switzerland’s cantons also rejected the proposals, broadcaster SRF said. The measure needed the backing of a majority of Switzerland’s 26 cantons as well as a simple majority of voters to succeed.

Concerns about the potential risks to the Swiss economy by introducing a “vollgeld” or “real money” system appear to have convinced voters to reject the proposals.

“We are pleased, this would have been an extremely damaging initiative,” said Heinz Karrer, president of business lobby Economiesuisse.

The vote, called under Switzerland’s system of direct democracy after gathering more than 100,000 signatures, wanted to make the Swiss National Bank (SNB) the only body authorised to create money in the country.

Contrary to common belief, most money in the world is not produced by central banks but is instead created by commercial lenders when they lend beyond the deposits they hold for savers.

This arrangement, underpinned by the belief that most debts will be repaid, has been a cornerstone of the global capitalist system but opponents say it is unstable because the new money created exceeds economic growth.

If approved Switzerland, famed for its banking industry, would have been the first country in the world to introduce such a scheme, leading opponents to brand the plan as a dangerous experiment which would damage the economy.

The plan, if accepted could have had repercussions beyond Switzerland’s borders by removing a practice which underpins most of bank lending in the world.

Support for reform had grown in the wake of the 2008 economic crisis, with campaigners saying their ideas would make the financial system more secure and protect people’s savings from bank runs.

But opposition came from the Swiss National Bank, Swiss government and business groups.

Herbert Scheidt, chairman of the Swiss Bankers Association, said the financial sector had shown humility since the crisis, and the system had been made “very secure.”

“The arguments we had against the initiative, that it would upend the entire monetary system, convinced the public,” he told Swiss broadcaster SRF.”

Campaigners said they would continue to work on raise their concerns, despite their support slipping to 25 per cent from 42 per cent earlier this year.

“The discussion is only just getting started,” said campaign spokesman Raffael Wuethrich. “Our goal is that money should be in the service of the people and not the other way around and we will continue to work on it.” — Reuters

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