The Swiss Franc – our beloved national currency – has in the last months beaten all records against the US Dollar and the Euro. At the time this article was written, the Euro was under CHF 1.25 und the US Dollar well under CHF 1.00. We are justifiably proud of the strong franc and see it as a sign that investors and traders around the world are placing trust in Swiss economic, fiscal, and financial policy. We are the best: Hurrah!

In the short term this might be a good thing: All imported goods are cheaper, and even filling up the car will be less expensive. Our Christmas vacations in the Austrian mountains or in the Rockies were a lot cheaper. Inflation will be held down thanks to the cheaper imports. So, is it Christmas and Easter at the same time?

Unfortunately not! Our tourism industry is already suffering from the strong Franc. Many foreigners will think twice about coming to Switzerland at these prices and even Swiss residents might start thinking about alternatives to Davos or St-Moritz. For our very important export industry, the strong Franc is bad news. Short term, financial hedging will give some stability, but medium and long-term this is not a feasible solution.

Basic economic factors, such as government debts in most large economies and the uncertainties surrounding the Euro make it highly probable that the Swiss Franc will further strengthen over the long term. Short-term movements will continue to be unpredictable. While the Swiss National Bank can manage some short-term disruptions, it cannot change the strong tide of currency markets. It would be like holding back a Tsunami with your bare hands! So probably, the Swiss economy will have to live with the strong Franc.

Swiss companies have been great at succeeding even with a strengthening Swiss Franc. Proof needed? In the last 30 years, the US Dollar lost some 75% of its value versus the Swiss Franc. And the US market is still the second largest export market for Swiss goods with 10% of Swiss exports (behind Germany with 20%, but ahead of France, Italy or the UK!) and it also is by far the largest destination of Swiss investments. So, except for strong short-term fluctuations, Swiss companies will certainly be great at adapting to a strong CHF. But for the Swiss economy, the challenge is much more difficult.

For the majority of Swiss companies, adapting in the medium and long-term will mean physical hedging, in other words, moving the costs into the same currency as the revenues. In non-economic terms, this means moving factory jobs, R&D laboratories, and management out of Switzerland to EU countries, to the US, and to Asia. Short of finding a recipe against a strong Swiss Franc, outsourcing, offshoring, and relocation closer to customers will continue to be a significant negative contribution to the growth of the Swiss economy.

In order to continue the success story of the Swiss economy, there is no other solution than diligently doing our homework, again and again. Creating and maintaining the best platform for international companies, keeping our borders open for trade, investments and qualified people, continuously strengthening our education system, promoting innovation and creating of new companies might not solve the problem of the strong Swiss Franc, but it will keep Switzerland as one of the most competitive and innovative economy of the world – in spite of the strong Swiss Franc. But thinking Switzerland has won the race and retreating to the “Reduit” to savor the victory and reduce “foreign influence” will spell doom on the Swiss economy. Switzerland has no cheap labor, no natural resources, no major domestic market. Our success comes through hard work and brains. That we can be proud of!