ZURICH, July 1 (Reuters) - Switzerland’s government on Wednesday announced additional spending cuts of up to 5 billion Swiss francs ($5.31 billion) in the coming years as the country grapples with a surge in the franc’s value.
The Alpine nation ended last year with an unexpected deficit after receipts came in below budget, prompting the government in February to outline plans for spending cuts of more than 1 billion francs in the coming years.
Further belt-tightening is now needed after the government again cut revenue forecasts, the finance department said.
The government plans to slash 2016 spending by 4 billion francs from what was first planned. It will also propose cuts of up to 1 billion francs for the 2017-19 period.
The additional cuts are in part due to Switzerland’s strong currency, which has cut into tax revenue and hit growth, the government said.
The strong franc has hurt sales of Swiss goods abroad, a hit to Switzerland’s export-reliant economy. The franc’s appreciation has led to wage freezes and pushed firms to cut thousands of Swiss jobs.
The franc surged in January when the Swiss central bank unexpectedly abandoned a cap on the franc of 1.20 per euro, prompting the government and economists to slash growth forecasts. Greece’s debt crisis has also pushed the safe-haven franc higher.
Switzerland’s decision to scrap a privileged tax status for holding companies based in the Alpine nation has been another strain on government coffers.
Public spending in Switzerland is kept in check by a so-called “debt brake”, enacted in 2003, which forces the government to link spending with revenues and build up surpluses when economic growth is sound.
Switzerland’s ordinary expenditure for 2014 was around 64 billion francs, up 0.5 percent on the previous year. In 2015 it is forecast to rise to 67.1 billion francs.
$1 = 0.9416 Swiss francs Reporting by Joshua Franklin; Editing by Mark Heinrich