The Creation of the Euro and the New International Monetary Order: A View from Switzerland

Jean-Pierre Roth, Chairman of the Governing Board

2nd Conference of the «Geld und Währung» Foundation on Financial Stability and Globalisation, Frankfurt, 4 June 2004, 04.06.2004

The introduction of the euro has been a very positive development for the international monetary system and for Switzerland as an economy strongly dependent on world trade.

Switzerland benefits from the greater transparency offered by the euro and the lower transaction costs made possible by its creation. Perhaps for the first time in history, Switzerland is surrounded by an area that shares the same monetary policy objective as it does, namely that of price stability. This explains to a large extent why the Swiss franc/euro exchange rate has been relatively stable over the past five years. But the presence of a single European currency has per se also shielded third currencies – like the Swiss franc - from too much volatility in the case of dollar turbulences.

At the same time, Switzerland keeps the trump card of an independent monetary policy that enables the Swiss National Bank (SNB) to respond very rapidly to the specific needs of the Swiss economy. Since 2001, the SNB has thus lowered interest rates more quickly and more decisively than the European Central Bank (ECB). With inflation less than 1 percent, Switzerland enjoys price stability and its interest rates lie clearly below corresponding rates in the eurozone.

A more homogeneous monetary system in Europe and a more stable international monetary order will help Switzerland to fully benefit from the present recovery of the world economy.