Let’s talk money today… I’ve started my morning coffee with Clive Crook’s article on Bloomberg who predicts that UK’s exit from the EU might happen sooner than expected unless the Union finds a solution to the gripping Eurozone crisis fathoming new instability challenges.
I was particularly struck by the arguments that set a parallel between UK’s economy (I’m no expert) and Switzerland’s (here I might know a few bits). He says that Switzerland’s relationship with the EU is unthinkable because the Swiss think that UK should head the EU which is unlikely given the in-out referendum.
I’m not sure where he got his idea from, however Switzerland is particularly comfy in her own federal canton shoes and shall not ever consider joining the EU and give up its national currency. Remember the August 2011 crash when the CHF-euro parity was nearly even? That was quite an alarming situation with investors grabbing the Swiss franc for fear of the euro currency collapse.
Well, it did not collapse and the EU has done much to lessen its volatility but that does not stop instability trends. The Swiss National Bank has maintained its cap of CHF 1.20 per euro to avoid deflation risks since the 2011 crisis peak and has vowed to maintain it whatever the consequences.
Of course the Swiss franc is overvalued but it’s not like the Swiss National Bank has a choice if it wants to avoid domino bankruptcies of exporters… And one asks, for how long will it be able to maintain this ceiling and what happens to the EU in case of failure?? Ooops!