A Franc Discussion: Switzerland’s currency troubles

The Swiss National Bank is faced with an overheating currency and slumping economy following the decision to abandon the currency exchange rate cap on the Euro. Uncertainty in the EU is leading to a rush on the franc and severely hampering the export and tourism-dependent Swiss economy.

From high unemployment in southern Europe to sluggish economic growth and Grexit fears, the EU and the euro have recently taken a beating. All this uncertainty is leading some investors to seek safe havens, such as Switzerland.

What the Wild Swiss Franc Appreciation Really Means

 On January 15, the Swiss National Bank (SNB) abruptly decided to end its policy of intervening in the foreign exchange market to hold the euro exchange rate with the Swiss franc (CHF) above 1.20 Swiss francs to the euro.

All hell broke loose. At one point, the Swiss franc climbed by nearly 40 percent against euro, ending the day almost 20 percent higher, at near parity with the common currency.

Commodities tax haven threatened

Le Temps, 27 August 2012

Swiss banking secrecy laws are not the only item in the European Union's sights. Since 2005, it has asked for changes in Swiss tax laws regarding commodity trading firms (oil, metals, grains) registered in the country. Switzerland became a world leader in the sector, in part thanks to "preferential tax laws that allow multinational trading firms to pay less tax than local firms," notes Swiss daily Le Temps in a lead article.

"Extensively used by raw materials traders, the system is viewed as discriminatory by the EU," explains Le Temps. Today, facing impatience from Brussels, Bern is now proposing to adopt a flat tax for all firms, rather than to be subjected to sanctions. "An option which is turning into a headache," says the leader writer, because

if they tax the traders at the current ordinary level, they will leave and thousands of jobs will be lost [...] as will millions [of Swiss Francs] in tax revenue. If they lower the ordinary level to one deemed acceptable to the commodity traders, they will dig huge holes in their budgets.