After a 90-minute meeting on Wednesday morning and despite anticipation that it would weigh in on the global financial crisis, Switzerland's government took a pass.This content was published on October 15, 2008 - 22:02
Spokesman Oswald Sigg told the Swiss news agency that it would communicate "only when there is something to communicate" and declined to disclose details of the meeting.
The move came on a day in which the Swiss Market Index (SMI), the country's blue chip indicator, followed the downward trend of European markets and ended a two-day rally 3.85 per cent lower at 6,019.10 points.
It stood in stark contrast to the high-profile reassurances from governments in the United States and Europe, whose leaders have taken to the airwaves in largely unsuccessful attempts to pacify volatile markets.
The economics ministry on Tuesday had rejected accusations in the media that the government had been slow to respond to the crisis, and cabinet minister Moritz Leuenberger said his colleagues were keen to not add "fuel to the fire of speculation".
Wednesday's meeting was the first time since October 2 that cabinet had met.
The centre-left Social Democratic Party called the government's decision "alarming". "The inertia and inaction could have disastrous consequences," said spokesman Jean-Yves Gentil.
The Greens said non-communication would "pave the way for speculation" and while the centre-right Christian Democrats were under the impression that the government retained control over the situation, a party vice-president indicated a statement from the government would have been helpful.
"Proactive communication would be reassuring," said Dominique de Buman.
Shareholders in some of Switzerland's largest firms were anything but reassured.
Down in Europe
Shares in Vevey-based Nestlé, the world's biggest food company, closed down 5.85 per cent to SFr42.20 ($37.19). Swiss Re, the world's biggest insurer, fell 8.43 per cent to SFr45.60 on the Swiss Stock Exchange.
Around Europe, the market's optimism toward massive bailout packages subsided as the prospect of recession became took hold.
Switzerland's central bank, the Swiss National Bank (SNB) has since mid-September joined forces with its European, Japanese and Canadian counterparts in an attempt to inject liquidity into jittery financial markets.
On Wednesday, the SNB announced it was working in conjunction with the European Central Bank to address the increased pressure on short-term frank liquidity and money market rates in the euro zone.
But the prospects for Switzerland's own financial institutions are measurably less bleak than in North America and other parts of Europe where some banks are on the ropes and others have been buttressed through massive state intervention.
Teodoro Cocca, a professor of asset management at the Johannes Kepler Institute in Linz, Austria, and formerly of Zurich University's Swiss Banking Institute, says conservative practices have kept the country's banks out of deep trouble.
Swiss banks relied less heavily on intra-bank loans than their international competitors and were less susceptible to credit drying up when banks stop lending to each other, Cocca told swissinfo.
"This funding is less volatile than any other financing source. If there is mistrust between banks it does not affect credit supply as sharply in Switzerland as in the other European or US markets," he said.
With the exception of UBS, Switzerland's largest bank, most institutions have lost comparably little. But even UBS, which was forced to write down tens of billions on bad subprime contracts, extricated itself well enough and sought the shelter of rich backers.
"UBS acted quickly and decisively enough to get itself out of the mess. US banks in particular tried to hide their problems and bluff their way out of trouble," Cocca explained. "UBS was more transparent about the depth of its difficulties and raised enough money quickly enough from Singapore, the Middle East and by distributing more shares."
Regulations requiring Swiss banks to carry higher cash reserves and UBS's strong wealth management practice also helped save UBS from oblivion.
UBS finished Wednesday down 6.17 per cent to SFr20.08 while rival Credit Suisse lost 9.11 per cent and ended at SFr45.90 per share.
swissinfo with agencies
Switzerland confirmed on Monday that it does not need to follow the example of many other countries, which had raised massive amounts of taxpayers' money to bail out stricken banks.
Following the United States' $700 billion (SFr790 billion) rescue package earlier this month, Britain announced a £37 billion (SFr73 billion) cash injection while Germany was poised to prop up its ailing financial system with a €470 billion (SFr724 billion) hand out.
Spain said it would provide up to €100 billion of guarantees for new debt issued by commercial banks in 2008. Norway and Portugal have also followed suit with their own bail out cash packages.
Germany, New Zealand and the United Arab Emirates are the latest countries to guarantee all bank deposits.
Iceland is close to bankrupcy.
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