Historically the Swiss have achieved stability in realms both political and economic. This is largely due to their position of neutrality and their fixture as a safe haven for international wealth. However, in this time of economic crisis it is precisely that reputation that is putting strain on Swiss businesses. With the already high value of the Swiss franc continuing its upward swing, Swiss manufacturers have found it difficult to conduct business in foreign markets for some time. Recently concerns have grown regarding an increased foreign presence threatening domestic markets. Though businesses and the Swiss National Bank (SNB) are implementing measures aimed at increasing efficiency and lowering costs, thousands of Swiss jobs remain on the chopping block.
Since the beginning of the global financial crisis the Swiss franc has received a great deal of attention. In accordance with their policy of neutrality, Switzerland has abstained from membership in the European Union and the Euro Zone. Therefore, when the value of the Euro began its downward spiral the Swiss franc remained remarkably strong. In fact one could say that it was strong to a fault. Investors the world over rushed to obtain the security provided by Swiss francs causing a massive deflation of the currency. As a result the price of Swiss exports skyrocketed, discouraging foreign nations to import goods manufactured in Switzerland. Conversely, nations importing goods to Switzerland have found themselves able to turn an easy profit when receiving payment in Swiss francs. These profits facilitate lowering prices in Switzerland at the consumer level, drawing Swiss consumers away from goods manufactured at home.
This has proved distressing to Swiss firms finding themselves unable to compete effectively in international and domestic markets. As an estimated thirty-six percent of Swiss firms move 'into the red', solutions are being sought by corporations as well as the SNB, equivalent of the American 'Fed'. Firms are clamoring for tax breaks and decreased regulation, hoping that lessening government presence would allow them greater freedom in conducting trade and increasing efficiency. The common goal on both sides is to preserve as many Swiss jobs as possible, jobs threatened with future layoffs as outsourcing becomes increasingly necessary to businesses struggling to keep their heads above water.
The strong Swiss currency reinforces their reputation as shrewd financiers, fitting harmoniously with the common worldview of the Swiss. Valuing their self-sufficiency, the strong franc is a traditional source of pride for the Swiss. Ironically, too strong a currency can prove a curse rather than a boon. In this exceptional case, the famous Swiss diligence appears to have backfired.
This may be particularly surprising to a country wherein the weakening value of the once-mighty dollar is prominently decried. Despite this, America has benefited from the weakened dollar on many fronts. It has made the U.S. more competitive in international trade by lowering the price of our exports. This is well illustrated by the recent free trade agreements made with South Korea, Columbia, and Panama. It has also made manufacturing within the country financially feasible for American businesses, keeping more jobs at home.
I'm curious to see what plans the Swiss have tomake things better and which plans will actually go through. It's a bit refreshing knowing that the US economy isn't the only struggling economy right now. We don't always hear about other stuggling economies because we're so focused on us and our economic issues. Sometimes it's nice to know that we aren't the only ones.
ReplyDeleteYou make some very good points. I wonder if the current trend to tighten identity standards on Swiss banks, which used to be completely anonymous, numbered accounts, has anything to do with the current currency issues. I suspect that more than a few wealthy investors have moved their funds from Switzerland to island banks. I do know that many European Union banks suffered great losses in the American financial crisis. Perhaps the Swiss did not have these investments, which would be another reason for the strength of the Swiss Franc.
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