Political parties in Switzerland reacted positively to news of the measures taken by the Swiss National Bank (SNB) on Tuesday to peg the Swiss franc to the euro.

"/> Political parties in Switzerland reacted positively to news of the measures taken by the Swiss National Bank (SNB) on Tuesday to peg the Swiss franc to the euro.

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SWISS NATIONAL BANK

Swiss politicians back move to stabilize franc

Political parties in Switzerland reacted positively to news of the measures taken by the Swiss National Bank (SNB) on Tuesday to peg the Swiss franc to the euro.

Even the Swiss People’s Party (SVP), which had previously criticized the national bank’s inaction, welcomed the move.

The SNB intervened in the foreign exchange market to peg the lower limit of the franc of 1.20 against the euro.

Christoph Blocher, leader of the SVP, told Tages Anzeiger newspaper:

“I don’t know if the level of 1.20 francs is set correctly. That must be left to the SNB as they are acting independently.”

Blocher said he trusted the national bank had received positive indications and hoped it could maintain the new threshold:

“The National Bank must win this war now,” he said.

Blocher also called on the government to take responsibility:

[Economics Minister] Johann Schneider-Ammann   said last week the franc would remain hard. The will to fight is strong now; the markets hear that.”

As markets reacted positively to the move, Schneider-Ammann too voiced his approval.

“I am extraordinarily happy that they took this step,” he told local Zürich radio station Radio 24, explaining his belief that the measure would bring relief and security.

“Companies now know how they can budget and the psychological effect is not to be underestimated,” he said.

Other political parties believe further steps will be necessary.

“This is just the first step. We predict a target of 1.40 Swiss francs,” said Social Democratic Party (SP) president Christian Levrat.

Levrat’s party says it welcomes the measures taken by the SNB in principle, pointing out that the announcement to buy unlimited foreign currencies sends an unmistakeable signal to the markets against speculation.

“For the labour market and the national economy, it is of central importance that the Swiss franc continuously remains at a level of around 1.40 to 1.45 Swiss francs, which corresponds to purchasing power parity,” the SP said in a press statement.

A show of unity in currency politics was demonstrated by the government and party leaders at the Von-Wattenwyl talks last Friday in Bern. 

Hans Grunder, president of the Basel-based Bürgerlich-Demokratische Partei (BDP) said he fully stands behind the currency exchange decision.

“Now it is important the alliance sticks together. Extraordinary situations demand extraordinary measures,” said Grunder, adding that he hoped a combination of the SNB’s measures and the government’s aid package would contribute to “somewhat better economic perspectives.”

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SWISS NATIONAL BANK

Why is the demand for 1,000-franc banknotes growing in Switzerland?

Large-denomination banknotes, like the 1,000-franc note, are rarely used for everyday transactions in Switzerland. So why are they becoming more popular?

Why is the demand for 1,000-franc banknotes growing in Switzerland?
The kind of banknotes the Swiss like to stash away. Photo by AFP

The demand for 1,000-franc notes has risen in the past months, data from the Swiss National Bank (SNB) indicates.

CHF1,000 converts to approximately €925.75, £824,63 or $US1126.98. 

Whether withdrawing the money from an ATM machine or directly from a bank, customers request large-bill denominations more often than before.

“We do know there is more cash being currently withdrawn in large notes, but it changes hands less often” Sarah Lein, a monetary policy expert from the University of Basel told SRF public broadcaster.

This means the money is not being spent but stashed away.

“We can conclude that some large notes end up in a safe”, she added.

READ MORE: Switzerland’s economy forecast to recover 'from summer onwards' 

The reason, she said, is that many banks charge their customers negative interests on large deposits.

“Therefore, it could be cheaper to simply withdraw the cash in large notes and keep it in a safe, especially since inflation has been extremely low for a long time”, Lein added.

This is not unusual — in times of crisis, more cash is often in demand.

But could this cause the shortage of 1,000-franc bills?

That is not likely to happen, Lein pointed out.

“Both the central and commercial banks have enough cash stored in their vaults to meet such demand. So there is always enough money available”, she said.

There is about 48.6 billion francs floating around in the form of 1,000-franc notes, constituting 59 percent of all Swiss notes in circulation. 

It is the world’s second-largest denomination after Brunei's B$10,000 note.

READ MORE: What do people in Switzerland spend their money on?

 

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