Clutching a lunchtime orange juice and sandwich in Zurich’s central station, nurse Nelly Studer captured the fears gnawing at Switzerland since the drama in the foreign exchange markets last Thursday when the Swiss franc jumped 30% in value against the euro.
“I hope that our exporters are not going to move jobs abroad. We need to keep jobs in Switzerland, and I hope they do not cut salaries either,” Studer said.
“I think that companies who rely on exports will have to find solutions. It will be very hard for them, very difficult.”
The Swiss central bank’s decision to abandon its cap against the euro made its chairman, Thomas Jordan, an unpopular man in the foreign exchange markets. But there was little outward sign that Swiss citizens were angry with Jordan on the road to Davos on Tuesday.
Despite Studer’s worries, she still welcomed the move to remove the “artificial” cap on the value of the franc.
She didn’t fear for her own career, as the health centre where she works is short of staff, she said. But she frets that exporters suffer, if their goods are too expensive in foreign markets.
On the train out of Zurich’s main station, a mechanic who worked for a international company and preferred not to give his name, admitted: “It’s not good for exporters.”
The cap had been in place in September 2011, as Swiss policymakers tried to prevent their currency becoming too strong. Its popularity as a safe haven rose steadily amid the eurozone storm. The Russian crisis last year had exacerbated the inflows into Switzerland and left the country with a battle on its hands to stop its currency strengthening through 1.20 against the euro.
After Jordan’s move – which caught out many FX traders, forcing several brokers to collapse – the currency experienced one of the biggest one-day surges in history.
Swiss nationals were surprised too. “We started January thinking that the cap would go on and on, and then boom, it was gone,” Struder said. But that’s not a reason to criticise the SNB chairman. “I have confidence in his abilities … removing the ceiling against the euro was the right thing to do”.
Jordan, like many central bank chiefs, is attending the World Economic Forum in Davos this week where his action is likely to be the subject of much debate. Economists fear a stronger franc will hurt economic growth and raise the risk of deflation.
Carl Müller, a pensioner travelling from Zurich with his wife, also retains his faith in Jordan.
“There has been too much panicking. We need to wait and see how the situation stabilises,” he explained, as his carriage wound around the tranquil shore of Lake Zürich.
Critics of the central bank are unhappy that it abandoned the cap without warning, having recently pledged to maintain it. But there was little sympathy for such complaints among the passengers of the express to Chur.
“They had to act immediately, or speculators would have profited,” pointed out Frau Müller.
Instead Jordan ended up causing pain for many in the markets who had expected the peg would stay in place.
As delegates began to register for the annual meeting in Davos – where 2,500 business executives, world leaders and policymakers try to put the world’s problems to rights – hoteliers and shopkeepers were more reluctant to offer a view.
Attendees have avoided the worst of the currency move as hoteliers demand payment in advance. But tourists with skiing on their minds might baulk at paying more than 700 francs for the cheapest set of skis. Switzerland was already one of the world’s most expensive countries. A small cup of coffee on that train out of Zurich would set you back SFr4.30, or a hefty £3.20 at today’s exchange rate.
Müller predicts tougher times for Switzerland’s tourist industry. They cannot simply expect eurozone visitors to swallow a 20% increase in bills when visiting the country. “We are quite pricey already,” he points out.
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