Senior banker warns of threat to Swiss economic recovery

Bruno Gehrig, vice-president of the Swiss National Bank, says Europe could face “rude awakening” Keystone Archive

A senior Swiss banker has warned that Switzerland's economic recovery may come under threat if the dollar continues to slide.

During a keynote speech in Bern on Tuesday, the vice-president of the Swiss National Bank (SNB), Bruno Gehrig, said Europe could face “a rude awakening” if the value of the dollar slides too quickly.

At the beginning of June, the dollar fell to its lowest level against the Swiss franc in two and half years.

Gehrig, who was addressing a meeting of Swiss industrialists in Bern, also warned that economic recovery in the United States could take longer than expected because investors had lost trust in capital markets.

Part of the blame for the loss of market confidence, Gehrig added, could be explained by what he saw as failed leadership in the boardrooms of many US companies.

Nervous investors

The US economy was being held back, he explained, by the fact that investors were nervous about putting their money into the markets, and that consumers were cautious about spending.

Aside from the US recovery, Gehrig said a key factor for determining the rate of expansion of the Swiss economy in the second half of 2002 would be the strength and speed of economic recovery across Europe, particularly in Germany.

He said that a delayed economic recovery in Germany – Switzerland’s biggest trading partner – would hurt Switzerland.

Gehrig also suggested an appreciation of the Swiss franc against the euro could hold back Switzerland’s economic growth in the second half of 2002.

Economists are concerned that a strong Swiss franc will make Swiss goods and services less competitive in export markets.

Gehrig is urging Europe to move forward with structural reforms in a bid to improve prospects for long-term growth.

The SNB forecasts that Switzerland’s gross domestic product (GDP) is likely to grow by one per cent in 2002.

By late afternoon on Wednesday, the Swiss franc was trading at just over SFr1.54 to the US dollar.

swissinfo with agencies