Country Spotlight - Switzerland
Switzerland is a small, central European, federal state comprising 26 cantons, 4 official languages, over 8 million inhabitants and covers an area of just over 41,000 sq km. It is perhaps best known generally for its banking industry, scenic beauty and the alps, as well as its cheeses, watchmaking, chocolate, Swiss army knives, and cuckoo clocks.
But perhaps one of the most outstanding achievements of Switzerland is maintaining its neutral status despite having been surrounded on all sides by the main opposing forces during both World Wars. In fact, Switzerland has not apparently participated in any foreign war since its neutrality was established back in 1815.
Its currency is the Swiss Franc which is also used in Lichtenstein. The Swiss Franc was declared the official monetary unit of Switzerland by the Federal Coinage Act, passed by the Federal Assembly on 7 May 1850. It was linked at that time at par value with the French franc. But prior to this, Switzerland had a huge range of various coinage originating from both its own cantons, cities, abbeys, principalities or lordships, and even some private banks, as well as from foreign trade. It has been calculated that during the 1800’s there was a total of no less than 8,000 distinct coins in current circulation in Switzerland.
Banking, and perhaps especially its banking secrecy, is maybe the most globally recognised Swiss characteristic. Its origins arose from its merchant trade in the early 1800’s and it has nurtured its policy of banking secrecy and client confidentiality ever since. Its secrecy has been the subject of great controversy over the years - for example, concerning the protection of foreign accounts and assets during World War II. In 2018, the Swiss Bankers Association (SBA) estimated that Swiss banks held US$6.5 trillion in assets or 25% of all global cross-border assets. But despite many attempts to remove banking secrecy laws in the country, their impact has continued to be minimal.
During its history, the Swiss Franc has been variously pegged to the value of the franc, gold ( Latin Monetary Union), and the U.S. dollar (Bretton Woods system) . Then, on 6 September 2011, the SNB set a minimum exchange rate of 1.20 francs to the Euro on the grounds that value of the franc was a threat to their economy, and that it was “prepared to buy foreign currency in unlimited quantities”. As a result, the franc fell against the euro from 1.12 francs to 1.22 francs and lost 9% of its value against the U.S. dollar within fifteen minutes.
As if this were not enough upheaval in financial markets, a few years later, on 15 January 2015, the SNB responded to the then declining value of the Euro with a move that was not announced in advance at all. It suddenly abandoned the existing ceiling against the Euro and provoked an almost instantaneous 30% increase in value compared with the euro, resulting in chaos in stock and currency markets. By the close of trading that day, the franc was up 23% against the euro and 21% against the US dollar. It is calculated that the full daily range of the franc was equal to $31,000 per single futures contract. This large and totally unexpected jump caused major losses (and gains) amongst currency traders and also later led to some acquisitions and bankruptcies amongst various companies in the financial sector.
The Swiss have one of the most advanced economies globally and, apart from the service sector is also very strong in industrial fields such as high-end watch making, food-processing, chemicals and pharmaceuticals. In addition, tourism is a major industry and its agricultural sector is heavily protected producing some 60% of its own food consumption.
So there we have Switzerland: a wealthy, diverse, land-locked, non-Nato, non-EU, non-Euro, neutral country sitting right in the middle of the European continent surrounded by the EU giants of Germany, France, Italy and Austria.