Budgets and public debt. – The financial consequences of the world war were also felt by Switzerland, despite its neutrality. The interruption of trade and the great political and monetary upheavals in many European countries could not fail to have repercussions everywhere. It was only in 1928 that the confederation’s budget was able to close in surplus: however, the world crisis was at the gates and from 1932 the deficit reappeared, as can be seen from the following figures (in millions of Swiss francs):
More than two-thirds of the federal government’s revenue comes from customs duties. Stamp duty and the tax for exemption from military service (half of which is due to the cantons) are also of considerable importance. Direct taxation, on the other hand, has little value. By far the greatest expenses are those for the service of the public debt, for subsidies and for national defense.
All of Switzerland’s public debt, both consolidated and floating, is internal. At 31 December 1935 the public debt of the confederation amounted to 2064.8 million (of which 1752.8 of consolidated and 311 of floating rate) and that of the railways to 2004.7 million (of which 1939.6 of consolidated and 61.1 of floating).
Money and credit. – Switzerland which, since 1850, had adopted the French monetary system (based on the franc divided into 100 cents) and which in 1865 had participated in the Latin Monetary Union, kept the effective bimetallic circulation until the outbreak of the world war. On July 30, 1914, the federal government was forced to declare fiat currencies and to issue 20-franc notes in place of gold coins. Subsequently, he then proceeded to issue cash vouchers of 5, 10, 20 and 40 francs, to prohibit the use of gold and silver coins of the countries of the Latin Union, to prohibit the export of gold in any form. (July 1915) as well as the fusion or transformation of gold coins (February 1918) and also of divisional ones (December 1919). In 1920, to put an end to invasion of silver (which, favored by the uneven exchange rate, had acquired imposing proportions and aroused concern also due to the sharp drop in the price of silver), the French divisional coins, after mutual nationalization, were withdrawn from circulation, the importation of silver shields (5 francs coin) from other states of the Union and Belgian divisional coins were declared out of circulation. The modalities for the repatriation and reimbursement as well as for the fusion and transformation into Swiss currency of the coins withdrawn from circulation (for a total sum of 232 million francs) were established by the Paris Convention of 21 December 1921.
Thus there was in fact the liquidation of the Latin Monetary Union, and with it the decline of bimetallism. However, the Union remained nominally in force until the end of 1926, when Switzerland, following the various monetary measures adopted by Belgium, France and Italy, declared to the states concerned (which did not make any opposition) that starting from 1 January 1927 he would have considered the Union dissolved. By order of February 1927, the gold coins of the countries of the Union were also put out of circulation and from 1 April of the same year only Swiss coins circulated in the confederation. The federal law of June 3, 1931 then sanctioned the state of affairs, definitively abolishing bimetallism and adopting the gold standard.
The monetary unit is the franc (of one hundred Rappen or cents), whose gold parity – previously set at gr. 0.29032 fine gold – must currently be maintained by the National Bank within the maximum and minimum limits of 190 and 215 milligrams. In connection with the devaluation of the French franc, the Swiss federal government also decreed (September 27, 1936) to align its currency, reducing its gold value by about 30% (i.e. within the extremes of 34½% and 26%). With the same decree, the convertibility of the National Bank notes into gold or gold currencies was suspended, and the legal tender of the notes was decreed. The gold coins were then withdrawn from circulation, which as of 30 September was thus composed of 1369 million National Bank notes, in addition to the divisional coins.
The National Bank fandata on 20 June 1907 (with headquarters in Bern and Zurich) has a monopoly on the issue and the obligation to hold a gold reserve of at least 40%. At 30 September 1936 the reserve amounted to 1,533.7 million in gold, over 23 million in sight availability abroad.
In addition to the National Bank, the Swiss Cantonal Bank for Mortgage Bonds (founded 1931), the Mortgage Bonds Bank (1931) and the Federal Loan Bank (1932), 27 cantonal banks operate in Switzerland, of which the most important are the Swiss People’s Bank of Bern (1869), the Swiss Bank Society of Basel (1872), the Swiss Credit of Zurich (1856) and the Federal Bank Ltd. of Zurich (1863).
