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The Impact of Legislature and Citizens on the Budgeting Process in Switzerland: Lessons for Central and Eastern Europe

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Scholars evaluating national and local budget procedures in Central and Eastern Europe generally advocate a greater role for legislative bodies and citizens. Mature federations and decentralised countries in Western Europe are often cited as prime examples of participatory budgeting which is supposed to lead to greater fiscal discipline, a better allocation of public resources and higher administrative efficiency. This paper investigates the strengths and weaknesses of legislative activism in Switzerland, with special regard to its ability to answer the double challenge resulting from a push for new expenditures and lower taxes, on one side, and an attempt to maintain deficit levels close to zero, on the other. While the strong consensus orientation, the careful regulation of revenue and expenditure assignment, as well as the systematic use of voters' right to direct participation are perceived as key to the success of the Swiss democracy, this study also highlights how these features can limit the effective influence of the parliament on budgeting and planning. Central and East European countries may learn several lessons from the Swiss case, all of which are rather thought to add an input to long-term reforms rather than provide immediate solutions. The analysis points out some serious limitations of the hierarchical budgeting model as well as the consequences of a haphazard and opaque expenditure and revenue assignment. It reminds, however, that the dynamic process of post-socialist transition requires governments and parliaments to preserve a great deal of flexibility in the budget procedure. At the same time, new methods of public management and a greater transparency of public budgets are examples of tools that may be introduced on the medium term without the risk of slowing down the transition process.

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Paper provided by Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland in its series FSES Working Papers with number 387.

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Length: 27 pages
Date of creation: Jul 2005
Handle: RePEc:fri:fribow:387
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  1. Alberto F. Alesina & Roberto Perotti, 1999. "Budget Deficits and Budget Institutions," NBER Chapters,in: Fiscal Institutions and Fiscal Performance, pages 13-36 National Bureau of Economic Research, Inc.
  2. Alberto Alesina & Ignazio Angeloni & Federico Etro, 2005. "International Unions," American Economic Review, American Economic Association, vol. 95(3), pages 602-615, June.
  3. Feld, Lars P. & Matsusaka, John G., 2003. "Budget referendums and government spending: evidence from Swiss cantons," Journal of Public Economics, Elsevier, vol. 87(12), pages 2703-2724, December.
  4. Andres Velasco, 1999. "A Model of Endogenous Fiscal Deficits and Delayed Fiscal Reforms," NBER Chapters,in: Fiscal Institutions and Fiscal Performance, pages 37-58 National Bureau of Economic Research, Inc.
  5. Ben S. Bernanke, 2005. "The economic outlook," Speech 90, Board of Governors of the Federal Reserve System (U.S.).
  6. Alberto Alesina & Roberto Perotti, 1994. "The Political Economy of Budget Deficits," NBER Working Papers 4637, National Bureau of Economic Research, Inc.
  7. Stephan Danninger, 2002. "A New Rule; The Swiss Debt Brake," IMF Working Papers 02/18, International Monetary Fund.
  8. repec:fip:fedgsq:y:2005:i:mar8 is not listed on IDEAS
  9. Lars P Feld & Gebhard Kirchgässner, 2001. "The political economy of direct legislation: direct democracy and local decision-making," Economic Policy, CEPR;CES;MSH, vol. 16(33), pages 329-367, October.
  10. Pommerehne, Werner W & Schneider, Friedrich, 1978. "Fiscal Illusion, Political Institutions, and Local Public Spending," Kyklos, Wiley Blackwell, vol. 31(3), pages 381-408.
  11. Lars P. Feld & Gebhard Kirchgassner, 1999. "Public Debt and Budgetary Procedures: Top Down or Bottom Up? Some Evidence from Swiss Municipalities," NBER Chapters,in: Fiscal Institutions and Fiscal Performance, pages 151-180 National Bureau of Economic Research, Inc.
  12. Bernard Dafflon, 2004. "Le désenchevêtrement des tâches et la péréquation financière: les chantiers du fédéralisme suisse après le 28 novembre," FSES Working Papers 385, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
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