Swiss voters dismissed a radical proposal to overturn one of the financial system’s core tenets.
The so-called sovereign money initiative, or “Vollgeld,” would have ended the system of fractional reserve banking that’s been around for centuries by allowing only the Swiss National Bank to “create” money. But 75 percent of voters rejected the measure, according to a projection from Swiss television SRF. Official results of the plebiscite are due later on Sunday.
“Of course we’re happy,” said Heinz Karrer, president of business lobby economiesuisse.
“A large majority of the population didn’t want to go for such an experiment.”
While polls had suggested “no” was likely, the fact supporters were able to muster the 100,000 signatures necessary to put it on the ballot is testament to the ongoing distaste about the financial industry still palpable a decade after the financial crisis. While that was sparked by the collapse of Lehman Brothers, Switzerland didn’t escape, and was forced in 2008 to bail out UBS, its biggest bank.
Proponents of Vollgeld argue that by putting the central bank solely in charge of steering the amount of money in the economy, there would be more safeguards to prevent the kind of asset price bubbles that caused the 2008 financial crisis. While the movement has gained the most prominence in Switzerland, thanks to its system of direct democracy, it has also found favor in other countries, such as Germany and the U.K.
“It was a pragmatic proposal to make the currency system better,” said Reinhold Harringer, a supporter of the measure.
Yet critics, notably the Swiss government and the SNB, campaigned against the plan, saying it could cripple the economy and politicize monetary policy.
Plebiscites and referendums are a key feature of Switzerland’s tradition of direct democracy, with votes on a wide variety of topics ranging from license fees for the public broadcaster to immigration quotas and even public defenders for mistreated animals taking place several times a year.
“This is basically trying to do away with one of the major types of instruments that we’ve seen in banking for hundreds of years,” said Martin Brown, a professor at the University of St. Gallen. Had the measure passed, banks would’ve faced adjusting their business models and “look for funding from other sources,” he said.
(Updates projection in second paragraph.)