Opinion: The Economic Crisis And The Swiss Perspective

Being a Euro-sceptic Brit living with Germans and other students of economics has lead to many interesting debates regarding current affairs in Europe. We tend to have different opinions on many issues, although I do find the Swiss here to be equally as Euro-sceptic. Many of these 'debates' are usually held after a few beers – alcohol tends to make philosophers of us all!

Switzerland, not being a member of the EU, is lucky enough to still have its own currency, allowing it to cushion itself from the turbulence of the surrounding Euro zone. Having control of their own currency, the Swiss are able to change their interest rates – much like the UK – in order to suit their own economic needs, whereas the Euro zone nations find themselves tied to the same rates. A disadvantageous situation indeed, which lead to the crisis in Ireland – the Euro zone-wide set interest rate resulted in creating catalyst conditions in the Irish property market. A bubble which popped quite spectacularly back in 2009.

'We want the Deutsch Mark back' Graffiti in Constance, Germany.

The current crises in Greece, Italy, Spain, Portugal and Ireland are prompting Europeans to reduce their exposure to the Euro and to increase exposure to perceived safe haven currencies, such as the Swiss Franc and indeed the Pound Sterling (despite our own harsh economic climate at home). This frenzied purchasing lead to the overvaluing of the Swiss Franc, crippling the Swiss export industry. The Swiss cheese and watch industry are not to be underestimated! Back in November the Swiss National Bank then set an artificial peg to the Euro of €1 : 1.2CHF to protect the Swiss economy. The Swiss Franc is probably the most overvalued currency in the world.

Swiss protectionism has created a noticeable island within the Euro zone. As I have mentioned many times before, prices in Zurich are high – antisocially high at times. The plus side is that this keeps the Swiss relatively prosperous: unemployment is very low, Swiss farmers aren't priced out of the market and consumers can afford to choose high quality, ethical goods (such as organic products) more so than anywhere else I've experienced.

Swiss Francs are a perceived safe haven for European investors.

I remember as a teenager being excited at the prospect of the EU and the new Euro currency. I was (and still am) hugely in favour of greater European integration – I loved the idea of being more easily able to head to the continent. But even as a teenager, I realised that the Euro could not work as a monetary union involving so many different European countries with differing compositions, interests and positions on the business cycle. The main advantages of the Euro are often said to be trade and ease of mobility. Whilst I cannot argue with ease of mobility, I refuse to believe that the Euro is a prerequisite for pan-European trade (again, citing Switzerland and the UK as examples).

Indeed the very same currency which set out to improve the welfare of Europeans seems to be endangering it. For example, I doubt the Irish with a high unemployment rate are currently benefiting from any increased trade. The exception is Germany, whose export industry benefits from the cheap Euro.

The Swiss don't seem to be interested in joining the EU any time soon, particularly considering the crisis, which may end up threatening this country, should the proverbial hit the fan. Fortunately direct democracy in Switzerland ensures that the Swiss will only join the EU project, if they so wish.

If you have any comments yourselves, please leave a comment!