Cabinet stalls to tackle currency shock fallout

Economics Minister Schneider-Ammann reiterates the government policy following the central banks controversial decision to change its monetary policy Keystone

The government says it is willing to launch an economic stimulus package to prevent the Swiss economy from falling into recession. But it has stopped short of taking short-term measures to soften the impact of the strong Swiss currency.

“The situation is very difficult,” conceded Economics Minister Johann Schneider-Ammann following Wednesday’s regular cabinet meeting. “But there is no need to intervene at this stage,” he added, dismissing calls by the political left.

The government pledged to analyse developments, as production costs for the industry rose considerably as a result of a decision by the central bank last week to lift the minimum CHF1.20 exchange rate per euro.

He said the cabinet was closely watching the European Central Bank’s monetary policy to increase the money supply and its impact on the Swiss currency and developments.

The value of the franc has surged to reach parity in the meantime, putting pressure on the country’s export industry, tourism and the retail trade.

Schneider-Ammann refused to speculate on an exchange rate acceptable for businesses.

“All I can say is, a CHF1.10 rate per euro would be a huge challenge for the Swiss economy,” he said.

Industry

To coincide with the latest statements, Schneider-Ammann also presented the government’s long-term economic growth strategy.

He stressed the importance of keeping a diversified industry afloat, securing jobs in the country and discouraging companies from moving production abroad.

“We want to offer job, keep unemployment down and give people a perspective,” he said.

Schneider-Ammann says he would welcome moves to re-launch a review of the cartel laws to keep the Swiss economy competitive. Parliament last year had botched a reform amid disagreement from the business community.

The growth programme, to be detailed by the end of the year, aims to increase productivity, notably by cutting the administrative burden for companies and liberalising the electricity market to boost competition.

Schneider-Ammann also hinted at a possible reduction in government subsidies and efforts to avoid the state or the businesses from running up high debts.

In a first reaction from the main political parties, the left criticised the lack of a coherent policy and warned of higher unemployment.

The right presented a list of measures for a more liberal economy and reiterated its demand to immigration limits.