DBRS Morningstar Releases Commentary: Switzerland: Referendum Result Supports Strong Credit Fundamentals

DBRS Morningstar released a commentary titled “Switzerland: Referendum Result Supports Strong Credit Fundamentals”

In this commentary, we discuss the results of the Swiss Referendum where the population voted 62:38 against the popular initiative "For Moderate Immigration" (Limitation Initiative), thereby preserving the free movement of people with the European Union.

DBRS Morningstar views this development as supportive of Switzerland's strong credit fundamentals (AAA, Stable). Had the initiative succeeded, it would have required the Swiss Federal Council to negotiate the existing Agreement on the Free Movement of Persons (AFMP) with the EU within twelve months, and if the negotiations failed, it would have to terminate the AFMP within 30 days.

Switzerland’s unique relationship with the EU is based on a network of agreements ensuring, among other things, access to the EU’s single market for several sectors. The existing AFMP is one of seven bilateral agreements that Switzerland and the EU have negotiated within a package known as Bilateral Agreements I. The vote could have negatively affected the relationship between Switzerland and the EU as Bilaterals I include a "guillotine clause", which nullifies the rest of the agreements if one agreement is terminated.

“The result of the vote avoids a substantial increase in the uncertainty regarding the relationship between Switzerland and the EU, that would have arisen if the ‘Limitation Initiative’ had been accepted” notes Rohini Malkani, Senior Vice President in the Global Sovereign Ratings Group.

Switzerland’s credit fundamentals remain strong, despite the severe economic shock from the Coronavirus Disease (COVID-19). Switzerland’s AAA ratings are underpinned by its wealthy and diversified economy, sound public finances, consistent external surpluses, and institutional strength. Switzerland benefits from a highly productive workforce, and high levels of both educational attainment and labor force participation.

Notes:
The commentary titled “Switzerland: Referendum Result Supports Strong Credit Fundamentals”
is available at www.dbrsmorningstar.com.

For more information on Switzerland, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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