Switzerland at the heart of Europe: between independence and interdependence
Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank
Université libre de Bruxelles, Brussels, 17.02.2015
Complete textPDF (857 KB)
Switzerland has a long history of political independence. But political autonomy does not mean economic isolation. Today, the Swiss economy is amongst the most internationally integrated in the world. As a small country lacking in natural resources, Switzerland started very early on to cultivate cross-border economic relations. Economic integration has contributed greatly to Switzerland's prosperity.
The flipside of the coin, however, is the country's broad exposure to economic and financial developments abroad, as demonstrated by the global financial crisis and its aftermath. In 2009, activity in Switzerland declined very significantly. However, the impact was softer than in the euro area. Several structural factors have played an important role in strengthening the resilience of the Swiss economy to shocks. Structural changes in the composition of exports, a flexible labour market and sound public finances have been key in allowing Swiss businesses to cope with a very difficult international environment.
The unavoidable discontinuation of the minimum exchange rate against the euro in mid-January 2015 was also a powerful example of interdependence. The decision provoked strong reactions on international financial markets and the Swiss franc appreciated sharply. The significant overvaluation of the Swiss currency means that the economy is currently facing strong headwinds and a number of challenges. The Swiss National Bank has lowered interest rates to unprecedented levels to cushion the effects of the appreciation. Moreover, it will continue to take the exchange rate situation into consideration when formulating its monetary policy. It will therefore remain active in the foreign exchange market, should this prove necessary in order to influence monetary conditions.
Nevertheless, the near future will see major challenges in Switzerland. Today more than ever, the Swiss economy has to focus on its structural strengths and flexibility, to ensure its international competitiveness and thus the country's prosperity in the future.