The Swiss National Bank’s decision on Thursday to do away with a lower limit of CHF1.20 on the exchange rate for the euro dropped like a bomb on pretty much everyone both inside and outside of the country. Newspapers saw the decision as extreme but understandable.
Constantly having to weaken the value of the Swiss Franc must have increasingly “robbed the SNB directors of sleep” wrote the Zurich-based daily newspaper the Tages-Anzeiger. But the bank is far from “off the hook”. If yesterday’s extreme increase in the value of the franc doesn’t correct itself, there will be “disastrous consequences” for the Swiss economy, the paper said.
The way the bank chose to communicate the decision – taking most of the country, including the Swiss cabinet and the bank’s own board of directors, by complete surprise – has damaged the organisation’s credibility, the Tages-Anzeiger said.
Thursday’s decision was “a poor advertisement for Swiss reliability” agreed the London-based Financial Times. The resulting plunge in the value of the euro compared to the Swiss franc – which dropped to a historic low of 98.92 cents around midnight – “defies the reach of hyperbole”, said the FT.
Market confidence in Swiss monetary policy “has been dealt a blow”, said the paper. Yet the move was understandable in view of the likely arrival of quantitative easing in the eurozone.
“In the end, the SNB decided to take pain now rather than more pain later,” the paper said. “Nevertheless, this is not the central bank’s proudest hour”.
The Zurich-based Neue Zurcher Zeitung agreed. “The abandonment of the minimum exchange rate” will be painful, but it’s the right decision”, the paper said. Waiting would have been even more expensive in the long run.
The Geneva-based French-language newspaper Le Temps was a bit more critical. “Did the bank even imagine the wave of shock it would produce on Thursday?” it asked. “One might question whether it proved its naiveté, not realising that it was endangering its credibility.”
Effect on tourism and trade
Two foreign papers questioned what effect the decision would have on Switzerland.
“A franc question: What was the SNB thinking?” was the headline in the Wall Street Journal. “The bank, and the economy it is supposed to manage, may ultimately be the biggest losers of the move,” the paper said. The fact that Swiss watches and holidays in the country have suddenly become a lot more expensive “can’t help, coming in the middle of the ski season, though the cast of millionaires headed to Davos later this month for the World Economic Forum can likely afford the higher prices,” it said.
Likewise, an article in the British paper The Guardian looked at how the bank’s decision would affect trade. The move “instantly made [SNB Chief Thomas Jordan] unpopular with Switzerland’s exporters, making their goods more expensive to buy abroad at a time when many of the country’s trading partners in Europe are already struggling,” said the paper.
It led with the headline: “Thomas Jordan – 'the most hated man in foreign exchange?' ”