Swiss senators propose six-billion army fund despite funding gap

Switzerland’s Council of States Finance Committee has proposed creating an armament fund next year that could give the army access to an additional six billion Swiss francs annually, even though its financing has not been fully settled, SRF reported.

Defence Minister Martin Pfister had proposed raising value-added tax by 0.5 percentage points to finance the army’s expansion. The Federal Council’s initial proposal for a 0.8 percentage point increase was rejected by the parties, while surveys indicate that voters currently oppose a VAT increase for the army.

Under the committee’s plan, the armament fund would be activated next year and allowed to incur up to six billion francs in debt annually. VAT would be increased by only 0.2 percentage points. If that increase failed, the fund would still remain in place.

About 500 million francs would flow into the fund each year from money that has so far been used to repay coronavirus-related debt.

Eva Herzog, president of the Council of States Finance Committee, said she believed the proposal had a good chance of winning parliamentary support. “We tried to find a classic compromise. Everyone gave something,” said the Social Democratic senator from Basel-Stadt.

Benedikt Würth, a Centre Party senator from St. Gallen, described the plan as a breakthrough. He said it represented significant progress on security policy, was financially viable and complied with the constitution.

Under the fund model, the debt brake would not be breached because the fund’s debts would have to be offset over time. The money could be used to make advance payments for air-defence systems, as an increasing number of arms companies are demanding large upfront payments.

However, FDP co-president Benjamin Mühlemann remained sceptical. The fund would finally allow urgently needed investments in security, he said, but he strongly opposed filling it by postponing the repayment of coronavirus debt.

The FDP and Swiss People’s Party continue to oppose even a small VAT increase for the army. The fund itself could nevertheless win parliamentary backing. The proposal will now go to the Council of States Security Policy Committee, and the Council of States is due to debate army financing for the first time in September.