Belfast Telegraph

Pity the Swiss, victims of their own success

Oh how the treasury officials of Portugal, Greece and the Republic must be laughing. Having been ridiculed for the mess they'd allowed their economies to descend in to, they're today watching on as one of the world's strongest economies is forced into a corner.

Switzerland - home of the multifunctional knife, excellent watches and a mountain-shaped chocolate bar - has found that being a pillar of strength in a global economy of despair isn't all it's cracked up to be.

The problem is that the marketing people of Switzerland PLC have excelled at their job, painting the region as a bastion of economic power at a time when its neighbours near and far are struggling to plug the widening holes in their bank accounts. Investors - lapping up that perception and noticing that the patchy repairs to said holes are beginning to come undone at the seams - have taken their money out of these sieve-like economies and piled it in to a currency they know won't fritter its value away in a hurry.

Who could argue with such a solid rationale? Well, you'd think the massive popularity of the Swiss franc would be welcomed by the country's government, but each positive comes with its own set of negatives if taken to extremes.

The Swiss franc's value against the euro has soared by 20% since the start of the year, at one stage nearly touching parity. That's great news if you're paid in Swiss francs and want to import goods into the country, but not such good news if you're a Swiss exporter. Your products will be much more expensive than those produced by your euro or sterling-denominated neighbours.

The Swiss National Bank, appalled by the country's growing lack of competitiveness, aren't the type to stand back and watch the situation worsen.

"The current massive overvaluation of the Swiss franc poses an acute threat to the Swiss economy and carries the risk of a deflationary development. With immediate effect, it will no longer tolerate a euro/Swiss franc exchange rate below the minimum rate of CHF1.20."

Basically, the bank will buy foreign currency in unlimited volume to keep the Swiss franc at €1.20. That won't cost it just a few francs, but will see it delve deep into its reserves to preserve what's left of the country's ability to compete. And many economists don't even think such drastic action will be enough because the Swiss franc is still strong at €1.20 compared to historical levels.

So, rather than envy the Swiss for their economic nous and reliable time pieces, we should pity them for being so good at managing their economy that they've been tripped up by the laggards who've been flailing around in their wake.

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