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Exporters get creative to fight strong franc

Starker Franken / Wechselkurs

Swiss exporters are resorting to a raft of creative strategies to cope with a strong Swiss franc that is eroding margins.

Twelve months ago one euro cost SFr1.50. Today it is worth SFr1.26. Economiesuisse expects it to stabilise at SFr1.33 in 2011.

With 90 per cent of its products exported, the Vaud-based temperature and pressure instrument firm Rüeger is suffering.

“To offset our losses we are reducing costs by purchasing raw materials in euros and US dollars,” director Bernard Rüeger told the Swiss News Agency. “We are also trying to keep our accounts in foreign currency. But in Switzerland salaries are paid in Swiss francs.”

Another development is for exporters to pay their local suppliers in euros. Some sectors are trying to put pressure on prices.

“There’s a risk of firms moving abroad,” admitted Rüeger. “Instead of purchasing supplies in Switzerland, firms will move to neighbouring countries, endangering Swiss subcontractors.”

For now the measures allow Swiss firms to limit the damage, “[but] they are recording significant reductions in their margins. An improvement in productivity will take time”, noted economiesuisse chief economist Rudolf Minsch.

The measures mentioned above “will certainly be enough” to keep healthy firms afloat, “but we should expect job losses, buy-outs or even firms going under,” Minsch added. “We are still expecting an increase in demand on world markets and this rise can partly offset the strong franc.”

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SWI - a branch of Swiss Broadcasting Corporation SRG SSR

SWI - a branch of Swiss Broadcasting Corporation SRG SSR