The Swiss Federal Council spent the day out of the office, instead holding their official meeting at the Chateau Mercier in Sierre
Update 20:00 BERN, SWITZERLAND – The Swiss franc rose yet again Wednesday 17 August, turning around after a dip at the start of the week against most major currencies. The shift comes in the wake of a Franco-German meeting that left investors lukewarm and efforts by the Swiss National Bank to reduce its strength that appear to have been viewed as not too onerous.
The currency developments were accompanied by the news late Wednesday that Switzerland could well have a 2011 budget surplus, rather than the deficit earlier predicted.
The franc finished the day in Switzerland at CHF.78 for the dollar, from a dollar high of CHF.80. The euro was trading at CHF1.1394 from a euro high of CHF1.1554 (figures, Reuters).
Tougher mortgage rules part of Swiss franc fallout
An undesirable side effect of the measures taken to rein in the Swiss franc is that banks are loaning out money for mortgages too easily, with very low interest rates, says the Federal Council. Strict rules about mortgage deposits are not being observed as much as they should, argues the council, so starting in January 2012 banks will face tougher restrictions and will be required to ask for larger deposits. The announcement was one of several linked to news of the federal surplus.
Central bank expands supply of liquidity to Swiss franc money market
The SNB announced early in the day that it was taking three steps, effective immediately, to “expand again significantly the supply of liquidity to the Swiss franc money market. In so doing, it is increasing the downward pressure on money market interest rates with a view to further weakening the Swiss franc exchange rate”:
- it aims to expand banks’ sight deposits at the SNB, from CHF 120 billion to CHF 200 billion
- to achieve this new target level as quickly as possible, it will continue to repurchase outstanding SNB bill
- for the same reason it will continue to employ foreign exchange swaps.
Budget surplus won’t have an impact on 2012 budget
The Swiss Federal Council, after a special summer session at the Chateau Mercier in Sierre Wednesday, announced that the 2011 budget is likely to have a CHF2.5 billion surplus instead of the CHF600 million deficit predicted earlier. The turnaround is due mainly to higher than forecast revenues, with companies’ profits higher than predicted in 2010 as the economic recovery proved to be stronger than expected. Government spending was also lower than predicted.
The new figures are based on accounts at the end of June 2011.
The 2012 budget was approved in May, at which point it was already clear that revenues for 2010 would be higher than expected, so the Federal Council says the new, mid-year predictions, will have no impact on the 2012 budget.
CHF2 billion industrial aid programme set up to avoid sending jobs abroad, reduce price fixing
The cabinet announced Wednesday it is setting aside CHF2 billion to rapidly boost industry, which is suffering from the role of the Swiss franc as a safe haven for foreign investors. The fund, the Federal Council acknowledges, is “large” and will be used to “strengthen industries that have been hit hard by the negative foreign exchange situation and to prevent jobs from going abroad”, including tourism.
The council will also seek a rapid change in the laws covering competition that would touch a number of price-fixing areas and it plans to provide Comco, the competition commission, with four additional posts for two years, to better enforce existing legislation.
Federal Council press release, details of the CHF2 billion industrial aid fund (Fre)
Melting old metals, Heraeus in Switzerland (photo, ©2011 Heraeus)
BERN, SWITZERLAND – Deep in the trade figures published 20 July by the Swiss government is a note that imports were down largely because no gold was imported from Vietnam.
Switzerland melts down the gold for use mainly as bullion, although some is used by the watch industry and increasingly, by the electronics industry.
Switzerland is one of the world’s leading gold smelters, partly as a result of its currency being the last to be linked to gold, until 1999, when Switzerland joined the IMF (International Monetary Fund).
The Swiss trade surplus, the difference between exports and imports, grew by a mere 2.7 percent in the first half of 2011 despite a very strong franc that should have made imported goods cheaper, giving imports a boost. Imports in fact slipped, and Vietnam’s gold was the reason, or lack of it, was the reason, but mainly because imports earlier were very high.
Three factors played a role, says economist and spokesperson for the Swiss Federal Finance Department Sébastien Dupré: Vietnam’s export quotas, the record high price of gold, and the “immense” stocks of gold in Vietnam.
“The Vietnamese government delivered export quotas for gold at the end of 2008. Before then, gold exports were strictly forbidden. Companies that are active in the market tend to use their quotas as rapidly as possible in order to get a new one; in other words, before the government makes an about-face.” China Post this week in an article on the Swiss trade balance notes that media in Vietnam say the government is considering tightening gold trade restrictions.
The price of gold in mid-July rose to a record high of $1,600 per ounce, and has since continued to climb, with a dip Friday morning below $1,600 following news of a second bailout for Greece. The price rose 8.1 percent in the second quarter of 2011, compared to Q1, according to the World Gold Council.
Analysts are offering varying predictions for how high it can go, reports the Financial Times 21 July in a series of interviews.
“The high price of gold has encouraged potential sellers in Vietnam to sell their gold immediately, in other words, to fill their export quotas right away,” says Dupré. “For the Vietnamese, the rise in the price of gold is made yet more attractive by the simultaneous depreciation of their currency, the dong. As a result, theincentive to sell gold is more marked in Viettnam than elsewhere.”
Vietnam has always been a huge gold importer, he notes, with 80 to 100 tons a year. “Given the longtime ban on exporting it, the gold stocks in the country have risen so that the country now has immense stocks.”
The country is reported to make massive quantities of jewelry, which can be exported, in part to get around government restrictions on exporting it in a monetary form.
Link to: wikipedia on gold, video: the making of gold ingots at Heraeus
Swiss tourism in 2010: not gloomy despite the high franc (a room with a dark but not gloomy view: hotel window in canton Valais, overlooking full moon, Alps and castle tower)
Bern, Switzerland (GenevaLunch) – Trade figures for Switzerland released 22 February show continuing solid growth in exports in January despite the strong franc at the start of the year, and a relatively strong performance by the tourism industry overall in 2010.
Exports grew 4.4 percent in January compared to December, which had month-on-month growth of 4.3 percent. Pharmaceutical prices fell under strong price pressure, but this was offset by the watch and machinery demand.
The trade surplus for January was CHF2.0 million, with exports of (rounded figures) CHF15.2m and imports of CHF13.3m.
Tourism final figures for 2010 show increases except for European visitors
According to final 2010 figures published 22 February by the Federal Statistical Office, the number of overnight stays registered in the Swiss hotel industry in 2010 was 36.2 million, a rise of 1.7 percent, or 619,000 overnight stays more than in 2009. Swiss demand was up 2.2 percent and that of foreign visitors 1.4 percent. “Overnight stays by visitors from the European continent (excluding Switzerland) showed a decrease of 2 percent”, according to the FSO press release, likely reflecting the rise of the Swiss franc against the euro.
Overnight stays were spread unequally, with Basel, Geneva and Zurich all having hotels closer to capacity, at more than 60 percent, than other parts of the country, while Neuchatel was under 30 percent.
Slide became clear in December
The year-end tourism figures are optimistic, but they hide a slide in overnight stays in December: down 3.3 percent compared to December 2009, with foreigners’ overnight stays down 7.4 percent. Germany, one of Switzerland’s key countries for tourism, sent 8.7 percent, less than Belgium (-39 percent) and Italy (-17 percent) in percentage terms, but the largest drop in absolute terms, with 36,000 fewer German overnight stays. UK tourist numbers fell by 13,000 in December, possibly linked to the weak pound.
Despite the relatively weak dollar, US visitors increased by 3,000 in December. And China showed the largest absolute increase, with 3,500 more visitors.
Bern to give tourism industry financial boost
The ruling Swiss Federal Council 16 February announced a series of measures to help industries that are most hurt by a strong franc, including tourism. The governmen is increasing tourism promotion budgets for 2011 and 2012 by CHF12 million to offset the continuing strength of the Swiss franc, citing the lag time between a higher currency and its impact on the number of visitors.
Links to other sites: Swiss Federal Customs office (Fre), Reuters
Regional traffic improvements now likely to get federal funds
Rail and road improvements have a better chance of moving ahead, thanks to Swiss 2010 budget surplus
Bern, Switzerland (GenevaLunch) – The CHF1.5 billion Swiss budget surplus forecast in September is likely to be double that, the federal finance department announced Thursday 13 January, and the originally budgeted deficit of CHF2b will become a surplus of CHF3b for 2010. The budgets for 2012 to 2014 are also expected to show surpluses, although smaller ones. Final figures will be published 16 February for 2010.
The immediate impact will be the cancellation of the “tasks” the ruling federal council has set itself in case of a deficit. These include reducing some tentative budget items, including improvements to the federal stud farm and stables in Avenches as well as reimbursing cantons for regional traffic improvements. These projects theoretically can now move ahead. The surplus will also enable the council to keep a budget margin, Finance Minister Evelyn Widmer-Schlumpf said Thursday, important in order to respect commitments to improving transport infrastructures, which include major roadwork and rail projects.
Country not yet out of the woods from the crisis, Bern warns
Bern, Switzerland (GenevaLunch) – The Swiss government Thursday published its financial report for 2009, showing a budget surplus of CHF2.7 billion, with the national debt reduced by CHF11b to CHF111. The figures were made known in February, but Bern has taken advantage of a change in the way it reports government revenues and spending to point out that the situation in 2009 was worse than in 2008, but that Switzerland weathered the economic crisis relatively well.
It warns that the full impact of the crisis will be felt only in 2011, with government revenues having a two-year lag because of the tax collection system. The report comes as several other European countries grapple with severe economic problems provoked or aggravated by the global economic situation in 2008-2009.
The good news is that the national debt is now CHF20b lower than in 2005, the year when Switzerland put into effect a spending brakes system. The impact of this will be felt next year, when spending will most likely not be increased because of lower revenues, with Bern budgeting a CHF2b deficit.
TVA revenues fell sharply, sign of weaker economy in 2009, but withholding tax revenue up
Bern, seat of the Swiss federal government
Bern, Switzerland (GenevaLunch) – Gloom and doom scenarios for 2009 turned out to be less serious than expected for the Swiss federal government: the year closed with an operating surplus of CHF2.7 billion. An additional CHF7.2b in sales of UBS convertible bonds provided the government with enough money to reduce the federal debt by CHF11 billion. It now stands at CHF111b, some CHF20b less than at its peak in 2005.
Switzerland’s federal government accounts for only about half the national debt, spokesperson and newly named finance director Fritz Zurbruegg told GenevaLunch: the federal debt is now 20 percent of GDP while the general figure, which includes cantonal and communal governments, is 40 percent.
“But that’s still much lower than the 100 percent which is the norm for the G20 countries,” he notes, where the national debt is, on average, now 100 percent of GDP and “rapidly climbing – although that’s partly because Japan is at about 200 percent,” says Zurbruegg.
Swiss trade surplus grew, investment income fell
Zurich, Switzerland (GenevaLunch) - Switzerland’s net investment earnings are negative for the first time since the Swiss National Bank (SNB) began compiling statistics in 1947, ironically, as a record trade surplus was posted for 2008. Losses from Swiss banks’ foreign subsidiaries caused 2008 income from direct investment abroad to fall sharply, from CHF60 to 8 billion. Meanwhile, the trade surplus for 2008 widened by CHF5b to CHF19b, as exports grew and imports fell. The impact of the global economic crisis affected trade figures only in the fourth quarter, after three quarters of strong growth.
Net investment earnings show the earnings from Swiss investments abroad, minus payments to foreigners on their investments in Switzerland. This is historically a large surplus because of the earnings of Swiss multinationals, including banks. Their earnings have been declining, but the bailout solutions for bank UBS meant yet more money flowed out of Switzerland.
