From an economic point of view as well, political autonomy should not and does not mean economic isolation. Today, Switzerland’s economy is amongst the most internationally integrated in the world. As a small country lacking in natural resources, Switzerland started very early on to cultivate cross-border economic relations. Since then, economic integration has contributed greatly to Switzerland’s prosperity. The flipside of the coin, however, is the country’s broad exposure to economic and financial developments abroad, as demonstrated by the global financial crisis and its aftermath. 4. Factors supporting Swiss economic performance  In the wake of the global shock triggered by the Lehman Brothers collapse in September 2008, activity in Switzerland declined very significantly (figure 3). However, the recession was softer and the ensuing recovery stronger than in the euro area. There are various reasons for the relatively solid performance of the Swiss economy. First, the purely domestic banking sector was in good shape and the economy was never faced with a credit crunch. Second, domestic demand has stayed robust, amid favourable housing market developments. Third, exports were relatively resilient to international headwinds. Fourth, as we have already seen, monetary policy acted to limit the negative impact of the Swiss franc’s massive appreciation. Let me now elaborate on the structural factors that have played an important role in strengthening the resilience of the Swiss economy to shocks. I will start by focusing on some interesting shifts that have taken place in the structure of Swiss international trade.

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.