Tourism industry reeling from soaring franc
Malcolm Curtis · 18 Jan 2015, 21:31
Published: 18 Jan 2015 21:31 GMT+01:00
- Shock move to untether franc sparks debate (16 Jan 15)
- Soaring franc causes queues at FX counters (16 Jan 15)
- Swiss franc soars after central bank action (15 Jan 15)
The industry is “under shock”, Jürg Schmid, director of Switzerland, told Le Matin Dimanche newspaper, commenting on last Thursday’s decision by the Swiss National Bank to scrap a policy in place for more then three years that kept the euro pegged at around 1.20 Swiss francs.
After the decision to drop this floor, the franc soared against the euro and the dollar before settling around parity with the European currency.
“This brutal announcement created incertitude in the decisions being made by foreign customers just before high season,” Schmid said.
Tourist officials immediately noticed a halt in reservations from Europe.
“Telephones stopped ringing and above all, online reservations ceased,” Schmid told the Sunday newspaper.
If the franc continues to remain at parity or close to the euro “we will register a significant drop in overnight (hotel) stays,” he said.
Countries from where customers are most sensitive to price are Germany and the Netherlands, Schmid said.
The currency fluctuations have less importance in other European countries and with visitors from China and southeast Asia “who are not just visiting Switzerland”, he said.
But Swiss residents remain the most important customers “and we must convince them to stay in Switzerland”, Schmid said.
Before working on a new strategy, he said he is waiting for the currency situation to settle to see where the franc will end up against other currencies.
The government has not yet been sought for help “and I hope we will not have to do so”.
Cantonal governments are also unhappy with the SNB’s move.
Jean-Michel Cina, president of the conference of cantonal governments, told the NZZ am Sonntag newspaper that the central bank’s credibility has suffered for saying it wanted to defend a euro-floor by all means before its abrupt about-face.
Finance Minister Eveline Widmer-Schlumpf, speaking to German-language Sunday newspapers, said she found the central bank’s decision to abandon the euro-floor was consistent and “is not put in question by me”.
The euro floor was just a temporary measure that had to be cancelled at some time, she said, adding that the Swiss government has complete confidence in the SNB.
Widmer-Schlumpf said she believed a rate of 1.10 francs per euro was manageable for the Swiss economy (late Sunday the franc was trading at more than 1.0 euros).
She said the government will need to monitor the situation but said it was too early to talk about the possible need of tax reductions or a relief package.
“If we see in six months that it requires other measures, we then need to discuss it.”
In an interview with Le Temps and Neue Zürcher Zeitung newspapers, published on Saturday, SNB President Thomas Jordan said that the response by markets to the central bank's decision to remove the euro-franc floor was "excessive".
Jordan said the Swiss franc was vastly overvalued and indicated that it would progressively fall back, though "this could take some time".