Will the Euro Make the Swiss Franc Obsolete?

March 7, 2002
Swiss-American Chamber of Commerce, New York


Monetary union brings many advantages to its members, in terms of lower transaction costs, enhanced transparency, and greater efficiency. It also implies costs, however, particularly with regard to the loss of monetary sovereignty. There is now just one monetary policy for the entire Euroland: «one size fits all». This could lead to difficulties in case of asymmetrical shocks. Adjustments that earlier on occurred through changes in exchange rates and domestic interest rates must now imperatively take place through changes in prices and wages, and adjustments in quantities.

Switzerland, in many ways, gets the best of both worlds. It will enjoy many of the advantages promised by the euro, without the loss of an important degree of freedom. Life will be made much easier for the Swiss who travel and do business in Europe. They will benefit from the simplicity, the transparency and the more stable European monetary environment, but Switzerland will keep its trump card of an independent monetary policy.

There is little risk that the euro will become a parallel currency in Switzerland, even though the euro will – and already does – circulate in Switzerland to a limited extent, just like the earlier national currencies did, in border areas and tourist regions mostly. Visitors will typically be better off using the local currency or their credit cards, however. Wages, rents and taxes will continue to be denominated in Swiss francs, and bank and postal transfers and payments will keep on being cheaper and less cumbersome if made in Swiss francs rather than in foreign currencies.

There is nothing to gain from tying the Swiss franc to the euro. Although the nominal franc-euro exchange rate would then be fixed, the long-run real appreciation of the Swiss franc would persist. It would simply take the form of a rate of inflation that would be higher in Switzerland than elsewhere, an outcome incompatible with the Swiss National Bank's objective of price stability. Moreover, Switzerland would lose its interest rate bonus, and the SNB would no longer be able to set a monetary course custom-made for Switzerland.

As long as the SNB maintains an independent course of action, it will uphold the reputation of the Swiss franc as a safe and sound currency, and it will preserve its attractiveness as an instrument for international portfolio diversification. The Swiss franc is an asset for the Swiss financial center. It is a highly successful product, and it will go on having a life of its own.

Download file now

The file can be downloaded with the button below.

Additional files

Related content


  • Ulrich Kohli
    Alternate Member of the Governing Board

Your settings

Required: These cookies (e.g. for storing your IP address) cannot be rejected as they are necessary to ensure the operation of the website. These data are not evaluated further.
Analytics: If you consent to this category, data such as IP address, location, device information, browser version and site visitor behaviour will be collected. These data are evaluated for the SNB's internal purposes and are kept for two years.
Third-party: If you consent to this category, third-party services (used, for example, to add social multimedia content to the SNB's website) will be activated which collect personal data, process these data, disclose them abroad - worldwide - and place cookies. The relevant data protection regulations are linked in the 'Privacy statement for the website of the Swiss National Bank'.

Choose your preferred settings:

This website uses cookies, analytics tools and other technologies to provide requested features, content and services, to personalise the content shown, to provide links to social media, and to analyse the use of the website in anonymised form for the purposes of improving usability. Personal data are also disclosed abroad - worldwide - to video service providers and the analytics tools of these providers are used. More information is available under 'Manage settings'.