Today, viewed from an international perspective, the Swiss economy is in a relatively favourable position. GDP has been growing for two consecutive quarters. Inflation is back in positive territory but without excessive upward pressure. Fears of deflation, which constituted one of the major risks of the past year, have not yet disappeared but are receding. Employment is no longer falling and unemployment may be stabilising. The Swiss export sector was strongly hit by the crisis and is still fragile. Economic activity has been sustained by domestic consumption (both private and public) and by construction activity. Last year’s GDP growth, at –1.5%, constituted the worst performance for the Swiss economy since 1975. Yet this figure is considerably better than the corresponding figure for most developed economies. Let us spend a moment examining the remarkable fact that private consumption growth in Switzerland has remained positive throughout practically all stages of the downturn. Immigration and precaution are the two key words that explain this exceptional result (with a third contributing factor being the fact that disposable incomes have stayed high in real terms, owing to a strong pre-crisis growth performance and a job market more robust than might have been feared). The recent immigration has been a positive contribution to consumption. But even the per capita figure for consumption has not decreased during the crisis. This has been possible because, very much in a textbook fashion, Swiss consumers have been able, during times of crisis, to draw on savings that had been comfortably replenished before the storm arrived.

The first real source of asymmetry is the very principle of limited liability. Beyond a certain level of remuneration and risk taking, one should ideally envisage a system which mimics that of partnerships or full personal liability. The fact that this is probably too ambitious justifies more ad-hoc complementary forms of regulation. Shareholders have by and large paid their dues in the crisis, but creditors typically have not. This is the level at which there is most to gain in both correcting the incentives (ultra-high leverage should worry creditors first, and regulators only afterwards) and protecting tax payers. By definition banks rely a great deal on credit; it is conceptually clear that creditors should come into play before taxpayers when something goes wrong. This would naturally be the case via bankruptcy proceedings. If we cannot go that far because of the crucial role of banks and certain financial institutions, we must find other ways for creditors to step in before taxpayers are involved. This can be achieved through ways of anticipating part of bankruptcy outcomes (living wills) or/and through some form of automatic conversion of a significant proportion of bank debt into equity. Secondly, these considerations address the financial stability issue only through the lens of individual institutions. We now know that this is not enough. Microprudence must be supplemented by macroprudence, i.e., a system design that encourages well-managed individual institutions to act, in particular at times of crisis, in ways that do not make life harder for other institutions under stress.