4.2  Flexible labour markets  The structure of the labour market also plays an important role in strengthening resilience to shocks. It must provide the necessary flexibility for firms to adjust rapidly to changing conditions at home and abroad. A key characteristic of the Swiss labour market is the combination of little layoff protection with a fairly generous unemployment insurance system. If they have to, firms can reduce their workforce with relatively few administrative impediments. Conversely, when the economic situation improves, firms will readily hire new workers again. As a consequence, the outflow rate from unemployment is higher in Switzerland than in most European countries, with the exception of the Nordic countries (figure 7). Another important institution is short-time working. It was used extensively by firms during the crisis. Short-time working enables firms to adjust their labour force to temporary shocks without destroying existing job matches. This is a crucial advantage, especially for businesses operating with a highly skilled workforce. It effectively cuts costs during the downturn while allowing businesses to quickly expand production once demand picks up again. A further key feature of the Swiss labour market relates to the way employers and employees interact. Generally, labour-management relations are good and disruptive strikes are rare. In the context of wage setting, many employment contracts are regulated by collective labour agreements. However, in contrast to the situation in other countries, these agreements are typically the result of consensus-oriented negotiations, with very limited government intervention.

Let me now wrap up my presentation and add a few words about our current monetary policy. 5. Concluding remarks  Switzerland has a long history of political independence. At the same time the country has consistently pursued prosperity via strong integration in the world economy in general and the European economy in particular. Through this active international integration into the global economy, the country has achieved and maintained a high level of affluence. However, the notion that Switzerland is a sheltered island in the midst of a stormy sea could not be further from the truth. For a small open economy like Switzerland, the international environment is source of both opportunities and large destabilising shocks. The unavoidable discontinuation of the minimum exchange rate against the euro is a powerful example. It provoked a strong reaction on international financial markets and, as a result, the Swiss franc appreciated sharply. The significant overvaluation of our currency means that the Swiss economy, notably the sectors exposed to international competition, is currently facing strong headwinds and a number of challenges. The SNB has lowered interest rates to unprecedented levels to cushion the effects of the currency appreciation. The lowering of interest rates means that holding Swiss francs is significantly more costly than holding foreign currency. The negative interest rate is set to have a corrective effect on the Swiss franc’s valuation. Moreover, the SNB will continue to take the exchange rate situation into consideration when formulating its monetary policy.