Rapid measures are needed to deal with the debt crisis, Switzerland’s finance minister told journalists in Washington on Saturday.
Eveline Widmer-Schlumpf, speaking after the annual meeting of the International Monetary Fund (IMF) and World Bank, said many countries had not yet realised the seriousness of the crisis.
She was echoing the call made by the new managing director of the IMF, Christine Lagarde, ahead of the meetings, who had warned that the whole world would be affected if the wealthy indebted countries did not find a solution to the crisis.
Widmer-Schlumpf had warm words for the action plan put forward by Lagarde, showing how the IMF can help members in difficulty, and for Lagarde’s input to the discussions.
In her speech to the International Monetary and Financial Committee, Widmer-Schlumpf stressed the need for recapitalising banks in difficulty. The Swiss government has been pushing for the country’s two main banks, UBS and Credit Suisse, to strengthen their capital base.
During the discussions at the IMF session, Widmer-Schlumpf put forward a proposal in connection with the review of the quota system which funds the body, under which each IMF member is assigned a quota – reviewed at least every five years –based broadly on its relative size in the world economy.
She suggested that in allocating the next quotas, the role played by a country’s financial sector, and its contribution to financial stability should be taken into account.
She pointed out that several countries make bilateral contributions in addition to their quotas to finance activities that are part of the IMF’s core mandate.
“This readiness to spend domestic political capital on multilateralism should find an expression in these members’ representation in the Fund,” she said.
The IMF called on the United States to act swiftly to reduce its debt in order to avoid recession. The US Treasury Secretary, Timothy Geithner, said the US had embarked on reforms, and called on other countries, in particular Europe and China, to do the same.
He criticised the differences between Europe, the US and emerging countries over how the crisis should be tackled. The US wants reflationary measures, while Europe wants to reduce deficits, he pointed out.
Philipp Hildebrand, head of the Swiss National Bank (SNB), who was part of the Swiss delegation, told journalists that Switzerland was observing the situation closely. His European counterparts were aware of the situation, and ready to take tough measures.
Switzerland was determined to defend the exchange rate peg of SFr1.20 to the euro which it set earlier this month. Hildebrand called the peg “an expensive, but necessary, decision”.
Swiss Economics Minister Johann Schneider-Ammann, who also accompanied Widmer-Schlumpf to Washington, told journalists that discussions at the World Bank meeting had dealt not only with ways of promoting growth, but also on job creation.
He stressed that economic recovery must go hand in hand with “greater inclusiveness”.
“Growth must benefit all strata of the population,” he said.
Widmer-Schlumpf had several bilateral meetings on the fringes of the IMF and World Bank meetings.
She signed a revised double taxation agreement with her Russian counterpart, Alexei Kudrin, with new rules on taxes on income and capital. The two ministers also signed a memorandum on financial matters designed to lay a foundation for “intensive dialogue” between their ministries.
A statement from the Swiss finance ministry said that the memorandum “dovetails perfectly” with the government’s strategy for strategic partnership with Russia.
Widmer-Schlumpf had talks with Italian Finance Minister Giulio Tremonti about the tax quarrel between the two countries. She told journalists that the meeting had enabled them to “move forward”.
She also met her counterparts from Germany, France, Poland and Serbia.
Journalists took the opportunity to ask the minister about other financial matters affecting Switzerland.
She expressed her belief that the tax dispute between Washington and Swiss banks would probably be resolved by the end of this year.
The US tax authorities want to be given details of customers who have hidden assets in Swiss bank accounts in order to avoid paying tax on them. The banks are resisting, since this would violate banking secrecy. The Swiss Senate last week decided to delay discussion of the issue until the next session of parliament in December.
“It’s very important for things to calm down,” said Widmer-Schlumpf.
“It’s always possible to find a solution, but we’ll need time for that.”
Michael Ambühl, who is heading negotiations over the matter, is due to meet his US partners again this week, she announced.
She said that – contrary to media reports – Washington has not issued any ultimatum for the transfer of the data that it wants.
Asked about the resignation on Saturday of Oswald Grübel as CEO of the UBS bank in the wake of a massive rogue trading scandal, she refused to comment, saying appointments at the bank were not her business.
“But I hope Switzerland will again become a banking centre that stands out for its quality,” she added.
Hildebrand said Grübel deserved respect for the way he had restructured and led the bank.
(with input from Calie Rerodo in Washington)