in the world. yet this privileged condition should not be taken for granted. quite the opposite : achieving and maintaining economic and social progress is an ongoing challenge. the years since the beginning of the global financial and economic crisis have been particularly testing. the events of the last few weeks are a striking example of this. as you certainly know, the swiss franc has again appreciated rapidly and massively. i will take this event as the starting point for my presentation. 2. monetary policy and the swiss franc switzerland conducts an independent monetary policy and has historically had a strong and important currency that plays a much bigger role in the international financial system than the bis central bankers ’ speeches size of the economy would imply. the attractiveness of our currency as a safe haven reflects the stability of the country and is, as such, an asset for our economy. however, since the start of the crisis back in summer 2007, this factor has also repeatedly been a source of pressure. the swiss franc started appreciating in august 2007 ( figure 2 ), with the onset of the us subprime crisis. the huge uncertainty generated by the collapse of lehman brothers one year later and the great recession which ensued put the swiss franc under further upward pressure. the situation worsened in 2010 and 2011. the european sovereign debt crisis and the fears of a break - up of the monetary union sent jitters through financial markets. in addition, market participants were worried that the us congress would not reach an agreement to avoid hitting the debt ceiling. to complicate matters still further, the global economic outlook turned noticeably gloomier. as a result, enormous safe - haven flows poured into the swiss franc. from august 2007 until august 2011, the swiss currency appreciated by about 40 % in real effective terms. yields on swiss confederation short - term debt turned negative and have remained negative ever since. confronted with such dramatic developments, the swiss national bank ( snb ) introduced a minimum exchange rate of chf 1. 20 per euro on 6 september 2011. against the backdrop of a rapidly deteriorating global economic outlook and policy rates that were already at the zero lower bound, this measure helped to avoid an extreme tightening of monetary policy conditions. by setting a cap on exchange rate appreciation, the snb provided some relief to businesses and bought them time to adopt measures that would reduce costs and improve productivity. nonetheless, the swiss franc remained highly valued. however, the minimum exchange rate of chf 1. 20 per euro was only

deal with these extreme conditions, overcome the difficulties and maintain its current high living standard? to answer this question, i will now step back for a moment from current events, and highlight some of the factors that, historically, have been instrumental in allowing swiss businesses to seize opportunities abroad and cope with an ever - changing environment. 3. a tradition of political independence however, let me first briefly turn to our tradition of independence. although mostly favouring a free - trade approach in its economic relationships with the outside world, switzerland has traditionally been very reluctant to relinquish political sovereignty. in particular, federalism, direct democracy and citizen involvement are seen by the swiss population as crucial elements of their identity. they are considered key factors to ensure the cohesion of a country made up of different linguistic and cultural groups. external neutrality helped switzerland to escape the tragedies which devastated the european continent during the last century, while maintaining internal cohesion. hence, the two world wars fostered switzerland ’ s attachment to its political autonomy. but autonomy does not mean isolation, or neglect of what happens abroad. switzerland ’ s political neutrality has often put it in a good position to mediate during conflicts and provide active solidarity. our country has made very active use of this comparative advantage. the most well - known example is the swiss engagement in the international committee of the red cross ( icrc ). it has also a long and well - established tradition of offering its good offices for diplomatic negotiations. 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