What Makes Switzerland More Successful Economically Than Germany

Abstract Whilst industrial production in Germany has been falling since 2019, it continues to rise in Switzerland. The paper explores the macroeconomic reasons in a comparative approach. It finds that greater fiscal discipline and a more stability-oriented monetary policy in Switzerland have enhanced efficiency in the private and public sector relative to Germany. The direct democracy in Switzerland has ensured in contrast to Germany not only fiscal discipline and the quality of public goods, but has also muted regulation. To catch up again, Germany needs comprehensive reforms, i.e. public expenditure cuts, deregulation and a tighter monetary policy.