Aug 7, 2011
GENEVA - WITH a robust economy, stable government and low public debt, Switzerland boasts all the ingredients that would make its heavily indebted neighbours turn green with envy.
But these virtues have attracted the unwanted attention of investors seeking a safe haven, sending the Swiss franc to records against major currencies that are now threatening the country's export-oriented economy.
Is the Swiss franc really worth its weight in gold? 'It's overvalued by far. Just looking at the interest rate differentials, people are losing about 1.5 per cent interest each year just to know their money is safe in the franc,' said Credit Suisse economist Claude Maurer.
'The only reason to buy the Swiss franc is really risk aversion,' he said.
Jan-Egbert Sturm, who heads the ETH Zurich's KOF Swiss Economic Institute, also noted that people are simply putting money in the franc because 'the other candidates are more likely to have some kind of a default problem one way or the other.'
'Investors are accepting the higher insurance premium. If you see a hurricane coming on the weather charts, you're willing to pay a higher insurance premium to insure it,' added Julius Baer chief strategist Christian Gattiker. -- AFP