mean for us is a higher inflation rate for some time, together with a collapse in asset prices and in domestic gross capital formation. a cocktail of higher interest rates and our high wage structure would be highly detrimental to our competitiveness in export markets. the third fear that was sometimes expressed, although here i must say i was rather sceptical myself, was that the euro could eventually make the swiss franc obsolete. with many of our trading firms billing and paying their suppliers in euros, there might be a tendency for them to adopt the euro more generally for their accounting as well as for their domestic transactions. some people even went as far as predicting that before long wages would be paid in euros. shops, hotels and restaurants would rapidly be forced to accept euros, so that visitors from abroad would no longer see the need to convert their euros into francs. eventually swiss consumers themselves would follow suit, so that switzerland would be de facto integrated into the eurozone. more than national pride would be hurt by such an “ euroization ” of the swiss economy. for one thing, such a development would entail the loss of seigniorage income. with a monetary base of about 40 billion francs ( 25 billion euros ), that is about 5, 700 francs ( 3, 500 euros ) per person, seigniorage in our case is far from trivial. but much more seriously, the loss of monetary autonomy caused by a displacement of the swiss franc by the euro would prevent the central bank from creating liquidity in case of need. to a large extent, the fears that we had reflect the more fundamental debate about fixed versus flexible exchange rates. which foreign exchange regime is appropriate for a given country at a particular time? although this view is not universally shared, many economists argue for a polar solution : either purely flexible exchange rates, or rigidly fixed ones. intellectually, i tend to share this view, except that i would like to take it one step further : either purely flexible exchange rates, or monetary union. rigidly fixed exchange rates do not constitute a polar case. in fact, they accumulate many shortcomings. thus, fixed exchange rates have never been known to be fixed for very long. fixed exchange rates are fixed until the day they change, and when they do change, they often do so brutally in an atmosphere of crisis, of pain, and of tears. no, i believe that if one really aims at exchange rates that are irrevocably fixed, then

fritz zurbrugg : the financial crisis in its sixth year – an end in sight? speech by mr fritz zurbrugg, member of the governing board of the swiss national bank, at the money market event, zurich, 21 march 2013. the complete speech can be found in german on the swiss national bank ’ s website ( http : / / www. snb. ch / en ) * * * in this, the sixth year of the financial crisis, the situation on the financial markets has eased considerably. is what we're seeing the prospect of an end to the crisis, or is this just a flash in the pan? measures by central banks made a major contribution to stabilising the financial sector. this sector, however, is just a part of the whole, and while its stability is a precondition for sustained global economic growth, it is by no means a guarantee. the positive mood in the financial markets and leading economic indicators raise hopes that a recovery is underway. if these hopes are to be realised, however, structural reforms need to be implemented. the three most significant challenges for the global economy are increasing the resilience of the financial sector, improving the flexibility of labour and goods markets ( especially in europe ), and consolidating the public finances of the advanced economies. progress has been made in all three areas. the way ahead, however, is still both long and difficult. due to the relatively lengthy period of weak growth, there is considerable danger that reform fatigue might spread in those countries most severely affected. it is therefore that much more important that the reforms are well - planned and credible, and that they are implemented consistently, but also prudently. there is also the threat that pressure will build on central banks to compensate a failure to reform with monetary policy measures. central banks can and must resist this pressure, in order that they can continue to focus on ensuring price stability. governments, on the other hand, should embrace this deep crisis as an opportunity to implement urgently needed structural reforms. only then will we be able to say, with certainty, that the end of the financial crisis is in sight. bis central bankers ’ speeches