Downside of high Swiss franc
EuroNews: A few hundred Swiss ‘Indignant’ protesters in Geneva and Zurich last week said their country is not all rock solid economy, luxury quality goods and banks sitting pretty.
They criticise the financial system, they say there is not enough democracy, too much influence for the private banks, and also an increase in health care costs and fear of losing jobs. This is even though Switzerland is considered a haven of calm amid global financial tumult.
With European neighbours reeling with mind-boggling debts, for the Swiss it is only 39% of GDP. Growth is being sustained and unemployment is enviably low.
But the high value of the Swiss franc is like a poison chalice. Concern about it has been rising since the summer. It is too strong. Seen as a safe currency, its international desirability has harmed Swiss trade.
In the space of a year, the value of the Swiss franc to the euro has risen by 20%. Its dollar value has risen by 18%. Labour unions and the central bank are worried. They say 100,000 jobs are at risk. A large part of this is because 60% of exports are EU-oriented. Export growth last year was 7%. This year it is 2.6%. The trade surplus shrank by 3.8% in 2010.
Industrial textiles and machinery are especially affected, along with electrical equipment and metals. But even small cheese producers have seen their exports plunge.
Retail is also suffering. The Swiss are taking advantage of boosted purchasing power over euro goods but stores have seen customers pouring over to the other side of the border to do their shopping there.
Tourism is under close watch. It is the country’s third-largest economic activity and so far has been comfortably competitive. It could lose a lot. It has already been losing European tourists, only partly offset by a rise in numbers from fast-growing emerging economies.