-->Quelle (FT)

To its neighbours, Switzerland's minuscule inflation, interest rates, unemployment and its large balance of payments surpluses may seem unattainable.


By Swiss standards, however, things are far from well. Unemployment, at almost 4 per cent, is nearing a record. Growth has turned into recession, capping years of underperformance, even compared with the sclerotic standards of its neighbour, Germany.

Strangely, such concerns have hardly featured in campaigning for the general elections on Sunday.

Instead, immediate debate has focused on themes such as law and order, foreigners and the enduring issue of Swiss exceptionalism - the pronounced feeling of being different to other European countries that has sustained the small, multinational and doggedly neutral state for centuries.

But the fact that such issues, which are not new, have moved to the front of the election agenda reflects the increasing tensions caused by the country's economic problems.

It is situation that has boosted the Schweizerische Volkspartei (Swiss Peoples' Party), the ultra-right group dominated by Christoph Blocher, its multi-millionaire leader in the Zurich canton, or region - the country's economic powerhouse. Along with fellow ultra-rightwingers Jean-Marie Le Pen in France or Jörg Haider in Austria, Mr Blocher has used the economic downturn to play on voters fears of rising unemployment and immigration.

The SVP is expected to gain more than 25 per cent of the vote, making it the biggest party in the lower chamber of parliament, reinforcing its success in 1999, when it emerged as the largest group, for the first time, with 22.5 per cent.

Mr Blocher, who will become the country's longest-serving parliamentarian in the new legislature, shot to prominence in 1992, when he galvanised popular misgivings about joining the European Economic Area - a sort of halfway house to European Union membership - in favour of Switzerland remaining aloof.

Since then, xenophobia and playing on popular uncertainties about Switzerland's long-term relationship to its bigger neighbours, and the EU in general, have served the SVP well.

In the past two years, the party has added the low tax, small government message, traditionally associated with the centre-right Radicals (FDP), to its electoral armoury.

And it has exploited high-profile corporate collapses, notably that of Swissair, the former national flag-carrier, to highlight cosy links between the political establishment and business.

The narrowly populist tone of the campaign has dismayed those who had hoped the elections would focus attention on what they see as more pressing issues for Switzerland.

"It wasn't that long ago that we told jokes about Austria," says Stephan Kux, a political scientist at Zurich university."Now, the nightmare vision is that, in five years, they will be richer than us."

Such feelings jar with Switzerland's long-standing reputation as a haven of wealth and well-ordered living. But the Swiss point to a deeper truth about the country's growing economic malaise.

One problem is that Switzerland is not one economy, but two. There are leading multinationals such as Nestlé and Novartis or the banking groups Credit Suisse and UBS and numerous smaller specialists.

There is also a deeply underperforming domestic sector, characterised by over-regulation and cosy cartels. And in a rare departure from tradition, the normally reticent central bank last week lashed out at Switzerland's domestic weaknesses.

The chances of such concerns being addressed when the new lower and upper chambers of parliament meet on December 12 to appoint a new government look scant, however.

But the government's freedom is limited by Switzerland's federal system, in which power is devolved to the 26 cantons, as well the tradition of direct democracy, with regular referendums.

Even allowing for such constraints, there is little chance the new government will have the cohesion to tackle Switzerland's pressing problems again partly due to Mr Blocher.

As in 1999, he is threatening to challenge the inscrutable formula for apportioning portfolios, if the SVP is, again, given only one seat on the Federal Council - the seven-strong executive that rules the country and which is composed of the four leading parties.

Last time, the other three parties each got two seats on the council.

Analysts dismiss Mr Blocher's threat to go into opposition, as the SVP has long done well out of portraying itself as underdog, while simultaneously benefiting from participation in government.

But, the likely stalemate in the polarised coalition bodes ill for Switzerland's ability to tackle its real problems.