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| Beginning
January 1,2002, twelve countries in Europe (Belgium Germany, Spain, France,
Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal, Finland, and
Greece) will begin a two-month transition from their existing national
currencies to totally new notes and coins in euros. Thus will the euro
become a physical currency two years after its official launch. After
February 28,2002, the old national currencies will no longer be legal tender
for commercial transactions.
What will this mean for the Swiss franc? Switzerland is directly affected by the Euro. Until recently, Swiss franc rates closely tracked those of euros. This strategy, it would seem, was to prevent the Swiss franc from becoming a refuge currency. A strong appreciation would have entailed macroeconomic re-balancing which could not immediately be offset by increased productivity. Thus, the more stable the euro, the more it would have a positive effect on Swiss exports, which indeed was the main driving force behind the upswing of 1999 and 2000. |
With
the coming of the "physical" euro, there is the possibility that
huge movements of cash evading European Union tax officials will reach
Switzerland to be exchanged for Swiss francs.
Depending on the size of
these flows, the Swiss franc may rise around the end of this year. |
The
Swiss National Bank signaled its desire for independence. A UBS report
concludes:
"By adjusting its
monetary policy framework in December last year, the SNB has charted a
course independent of the ECB... Since March, moreover, the Bank's
resolutely independent approach has successfully convinced the markets that
it is determined to go its own way.
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