Hundreds of towns, local authorities and public bodies around France are struggling to pay back loans that were indexed against the euro-franc exchange rate as a result of the rise in value of the Swiss currency.

"/> Hundreds of towns, local authorities and public bodies around France are struggling to pay back loans that were indexed against the euro-franc exchange rate as a result of the rise in value of the Swiss currency.

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SWISS FRANC

French towns trapped by Swiss franc rise

Hundreds of towns, local authorities and public bodies around France are struggling to pay back loans that were indexed against the euro-franc exchange rate as a result of the rise in value of the Swiss currency.

St. Tropez
Michael Gwyther-Jones

Tuesday’s Le Parisien newspaper named some of the many districts affected, which it claims include Saint-Tropez in the south and the department of Seine-Saint-Denis north of Paris.

The problems stem from low-interest loans that were taken out on the condition that if the euro-franc exchange rate fell below a certain level, rates would become progressively higher.

The Swiss franc has fallen in ten years from a rate of around 1.5 francs to the euro to a close on Monday of 1.1 francs. At its strongest, in October 2007, the euro bought almost 1.7 francs.

Le Parisien claimed that some of the interest rates have now soared to 20 percent. Some local authorities have decided to take legal action to try to avoid the punitive charges.

“We contest the legality of these loans where the interest rates and the penalty calculations are not clearly stipulated,” lawyers working for the mayor of Saint-Cast-le-Guildo in the northern Brittany region told Le Parisien. The town is taking action against the bank Dexia, which sold it the loan.

“We are bound hand and foot,” said the mayor, Jean Fernandez. “I’m a maths teacher and even I find it impossible to understand the formula that Dexia put in this contract.”

The newspaper claimed that many more local authorities, emergency services, hospitals and other public bodies could be trapped in loans with high interest rates.

The news came on the same day that the Swiss National Bank announced it is setting a minimum exchange rate of 1.2 francs to the euro, although even this rate is unlikely to help many of the struggling loan holders.

See also: Swiss stocks jump on currency peg news

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SWISS NATIONAL BANK

Swiss fashion chain to pay HQ staff in euros

Telly Weijl, a Swiss fashion chain based in Basel, has decided to starting paying staff at its headquarters in euros instead of Swiss francs, according to media reports on Wednesday.

Swiss fashion chain to pay HQ staff in euros
Photo: The Local

The company’s CEO Beat Grüring told newspapers of the AZ media group that 85 percent of the chain’s revenues are earned in the eurozone.

Continuing to pay wages at the company’s head office in francs would represent a currency risk, Grüring is quoted as saying.

Telly Weijl, with more than 780 stores in 37 countries, had considered moving its headquarters to Lörrach, Germany, where it already has a logistics centre that handles 60 percent of its goods, he said.

But most head office employees were opposed to the move, Grüring said.

While some supported the relocation “we realized that most did not want to work in Germany”.

The company was concerned about losing workers, some of whom have already quit because of fears of a move to the German city.

All employees assigned to the Basel office will be paid in euros, while existing employees there can decided whether they want to be paid in euros or Swiss francs, the SDA news agency said.

The headquarters employs 200 people.

Staff at Telly Weijl’s Swiss stores will continue to be paid in Swiss francs.

The privately owned company, which markets clothes to teens and young women, employs around 3,400 people globally with annual sales of more than €500 million.

Companies in Switzerland are struggling to deal with the franc, which the Swiss National Bank has repeatedly said is significantly over-valued against the euro.

On Wednesday,  the euro was trading at around 1.08 francs after dipping as low as 1.0774 francs on Tuesday.

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