SWITZERLAND - BUDGET AID TO NEW EU-MEMBER STATES AS A SOCIALIST ENTERPRISE

According to World Economic Forum, Switzerland peaked as the most competitive economy in 2006. Switzerland recently officially decided to establish cooperation between itself and Eastern Europe. But it chose the wrong direction. Swiss policy-makers proposed a development aid budget, the aim of which is to subsidize new EU member states in order to help them creating sustainable economic development. This perception is clearly misguided. The most efficient way to creating a sustainable economic development is a strong protection of private property rights. This is a particular point at which Eastern tigers should start building their reputation. If we put ourselves into the position of a university professor, then only Estonia would receive an A+ from "property rights protection" exam. Inefficient, politically-influenced judicial staff in countries such as Poland, Czech Republic, Slovenia and partly Hungary implicitly imposes a heavy burden to the economy. Steve Pejovich, Friedrich August von Hayek and Milton Friedman wrote very large volumes on the importance of sufficient private property rights protection. In fact, Switzerland still retains some heavily burdensome controls and restrictions on international trade. The World Bank reports that Switzerland's weighted average tariff rate in 2001 (the most recent year for which World Bank data are available) was 1.5 percent. Nearly all agricultural products are subject to import duties and variable import quotas. After having graduated from the competitiveness, Switzerland is obviously heading in the wrong direction. Massive governmental outlays to new member states are an insane idea. It would be far more efficient if Switzerland abolished quotas and duties on agricultural products and finally opened-up itself to new member states and let the competition run the agricultural market. As far as I can see, there's no sense in contributing budget aid to any particular state or new comer. A continual addiction to such outlays would result in a series of lacks of economic performance while policy-makers in new members states and in the EU in general, focused on lobbying for more budget aid instead of the commitment to further privatization, market and price liberalization and on officially announced policy of inflation targeting in order to vitalize the stabilize the public finance and to let floating exchange rates run. Hungary suffers heavily from instability of public finance. More budget aid to Hungary would result in another deception, fraud and fatherly expanded government spending. Slovenia, for instance, needs to privatize the rest of the state-controlled economy. It has to liberalize its highly rigid labor market and it has to radically reform the "cradle-to-grave" pension system which is currently running toward the collapse. In this very position, Switzerland is acting like a socialist enterprise, an extensive central-planning board that is heading in the wrong direction. The result of this mismanaged policy, if enacted, will cause exactly opposite effects compared to the intention of the Swiss government itself.

If the leaders of new member states are smart and wise enough, then they should reject the latest proposition of the Switzerland as well as they should repeat the words of Mart Laar; "Give us no aid, but trade."