This trust forms the basis of functioning of the entire financial system and any dent in this trust can have a significant destabilizing influence. The series of measures initiated by global standard setting bodies and individual regulators in the aftermath of the financial crisis clearly underscore the imperative of having a credible and effective regulatory regime.
A key component of Swiss fiscal policy – albeit one which cannot be readily transposed to the euro area – is the principle of direct democracy which gives the general public a say in fiscal decisions, especially at the cantonal and local government level. Studies1 suggest that cantonal referendums tend to curb spending.