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(Bloomberg) -- The Swiss National Bank’s decision to give up its cap on the franc hands constitutes a particular challenge for the export and tourism sector, the government said today.
The Swiss central bank stunned markets today by abolishing its three year-old cap of 1.20 per euro today, causing the currency to appreciate as much as 41 percent. It traded at 1.02668 per euro at 7:36 p.m. in Zurich.
“The government’s economic committee trusts the central bank will guarantee price stability while taking economic developments into account,” it said in a statement today. The cap was a “good, though always temporary instrument,” that gave companies the ability to plan ahead, it said.
The European Union is Switzerland’s biggest trading partner, and for years Swiss manufacturers and the tourism sector have struggled to retain business in the face of an unfavorable exchange rate. The SNB set the currency cap in September 2011 after the franc nearly touched parity with the euro, threatening to choke off exports.
Hotel and restaurant managers, particularly in ski resorts, have complained of a decline in guests in recent years as European vacationers opted for less expensive destinations in neighboring France, Italy and Austria.
The SNB’s mandate is for keeping inflation positive yet below 2 percent.
The Swiss government is made up of five parties, including the Social Democrats, or SP, and the European Union-skeptic Swiss People’s Party, SVP. They differed in their reactions to today’s news.
“The SNB is playing with fire,” the SP said in an e- mailed statement, adding that Switzerland is at risk of “catastrophic consequences for the economy and jobs.”
By contrast, Thomas Matter, Chairman of Neue Helvetische Bank AG and SVP member of parliament, called the exit “a very courageous decision,” the Neue Zuercher Zeitung reported.
--With assistance from Elena Logutenkova and Jan-Henrik Förster in Zurich.
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