With the euro almost at parity with the Swiss franc, the Swiss National Bank has cut interest rates further this week and will significantly increase the supply of liquidity to the money market.

"/> With the euro almost at parity with the Swiss franc, the Swiss National Bank has cut interest rates further this week and will significantly increase the supply of liquidity to the money market.

" />
SHARE
COPY LINK

FRANC

Euro and Swiss franc approach parity

With the euro almost at parity with the Swiss franc, the Swiss National Bank has cut interest rates further this week and will significantly increase the supply of liquidity to the money market.

Euro and Swiss franc approach parity
Paul Papadimitriou

The rise of the Swiss franc has been making international headlines for weeks now, with the Swiss National Bank (SNB), government and businesses – especially exporters – all looking for ways to lower its value.

Switzerland’s strong economy, stable government, low interest rates and tiny public debt have caught the attention of investors looking for a safe haven, sending the Swiss franc to record highs against major currencies, to an extent that the exchange rates are now threatening the country’s economy.

The euro briefly sank under 1.01 CHF on Wednesday and therefore practically reached parity with the Swiss franc. It recovered slightly again afterwards. The dollar was worth less than 71 Rappen before it also recovered. Both currencies have reached record lows against the Swiss franc, the Tages Anzeiger newspaper reported.

The SNB announced a cut in interest rates to “as close as possible to zero” a week ago and said it would very significantly increase the supply of francs to the money market over the next few days.

It added it would keep a close watch on developments on the foreign exchange market and take further measures if necessary to counter the rise of the franc, according to Reuters.

Despite the turmoil, it is not all bad news for the Swiss, with many reports of people travelling to nearby countries especially France and Germany to take advantage of the strength of the franc by paying for goods in euros.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.

ECONOMY

Why Switzerland continues to attract foreign companies despite the coronavirus pandemic

Despite the pandemic, 220 foreign businesses set up their offices in Switzerland in 2020.

Why Switzerland continues to attract foreign companies despite the coronavirus pandemic
Switzerland is a magnet for foreign companies. Photo by Valeriano de Domenico/AFP

While this number is 9 percent lower than in the previous year, these companies have created 11 percent more new jobs — a total of 1,168 — than in 2019. Most of the new jobs were created by companies from China, the United States and Germany.

About 3,600 more positions are expected to be offered by these enterprises in the next three years, according to data from SRF, Switzerland’s public broadcaster.

In fact, Switzerland is one of the very few countries that have been able to attract international companies to its shores in 2020, a notoriously bad year for the global economy.

READ MORE: Why Switzerland’s economy is on the up despite the coronavirus pandemic

Experts believe this is due to the country’s strengths, including political, economic and financial conditions.

“Even in a time of crisis, Switzerland scored thanks to its stability, predictability and security”, said Patrik Wermelinger, member of the executive board of Switzerland Global Enterprise (SGE), which promotes the country abroad on behalf of the federal government and the cantons.

There are also other reasons that had prompted foreign companies to come to Switzerland in 2020, despite the economic uncertainty and travel restrictions.

“Protection of legal rights, freedom, and personal responsibility are stronger in Switzerland than in many other countries, even in times of pandemic”, said SGE’s co-president Walter Schönholzer.

Switzerland’s attractiveness is also boosted by studies showing the country’s economy remains the strongest in the world.

Even though the health crisis plunged Switzerland’s economic activity into a “historic” 8.2-percent slump in the second quarter of  2020, the country still boasts the world’s most resilient economy, according to research by an insurance and reinsurance company Swiss Re. 

The International Monetary Fund (IMF) expects a 3.5-percent rebound in Switzerland’s gross domestic product (GDP) in 2021.

It said Switzerland’s economy absorbed the shock of the pandemic better than other European countries and it “has navigated the Covid-19 pandemic well”.

IMF added that Switzerland’s “early, strong, and sustained public health and economic policy response has helped contain the contraction of activity relative to other European countries”.

SHOW COMMENTS