Switzerland at the heart of Euroland

Jean-Pierre Roth, Chairman of the Governing Board

University of Lausanne, Lausanne, 21.01.2003

What lessons can we draw from the recent process of economic and monetary integration initiated by the European Union? In the first decade of the single market, a new economic landscape has emerged: the countries in the centre of Europe are suffering from a lack of growth while the peripheral countries are recording high growth rates. Since the national currencies were replaced by the euro, the exchange rate has ceased to function as a balancing mechanism. As a consequence, the competitiveness of the individual countries converges through the different development of inflation.

Where is Switzerland's place in this new economic landscape? What lessons can we learn for a possible integration of Switzerland into the European Monetary Union? As recent developments in Euroland have shown, economic integration works in a way that would probably leave the Swiss economy in a rather uncomfortable position. Not only would it lose its substantial financing advantage (lower interest rate level), but it would also have to deal with a faster increase in the domestic price level than many of its European competitors.