niklaus blattner : three nations, two currencies, one economic area speech by mr niklaus blattner, vice - chairman of the governing board of the swiss national bank, at the freiburger montags - gesellschaft, freiburg im breisgau, 6 june 2005. the complete speech can be found in german on the swiss national bank ’ s website ( www. snb. ch ). * * * the upper rhine euroregion comprises baden, the sudpfalz region, alsace and northwestern switzerland. in what shape is the economy in this region? is it as dynamic as we would like? are the national borders that transect the region a handicap or have we come to accept them? what are the implications of the fact that the region has two currencies? firstly, the upper rhine euroregion is economically sound. this is due not least to the capital goods sector and the pharmaceutical / chemical industry, with the latter ensuring high added value in northwestern switzerland in particular. however, the upper rhine euroregion does not rank among the very best in europe. while its level of economic added value is perfectly acceptable, its growth in recent years has been significantly lower than that in other regions. the region ’ s situation is, therefore, no different to that of many other economic areas in continental europe. secondly, cross - border integration in the upper rhine euroregion is high. the diversity of the economic interrelationships between the national regions is reflected in the brisk trade in goods, capital flow and free movement of persons. it is clear from this economic integration that the fear of the region ’ s borders considerably compromising economic development cannot be confirmed. rather, the diminishing, relative importance of intra - regional foreign trade and intra - regional cross - border direct investment is due more to globalisation and the ensuing increase in the influence of eastern european and asian economies than to weakening ties within the upper rhine region. thirdly, the most notable aspect of the relationship between the region ’ s two currencies since the introduction of the euro in 1999 is its stability. that does not mean, however, that the issue of switzerland ’ s ascension to the eu is of no consequence. having its own currency allows switzerland to conduct an independent monetary policy that is tailored to suit its needs. finally, the economic policy can help the region thrive further by removing remaining hurdles, such as those in the labour market and in the exchange of goods and services ( cassis de dijon

. the title of my speech is “ monetary independence and monetary stability : two sides of the same coin ”. i will start by looking at some of the features which have given switzerland the reputation of a financially strong country. among other elements, i will show that price stability has played a central role in this respect. but there can be no monetary stability without an independent central bank and an independent monetary policy course. drawing on my experience at the swiss national bank, i will spend some time discussing what, in my view, are the most crucial characteristics of a successful monetary policy. i will conclude my speech by addressing the thorny question of the choice of a monetary policy regime. after all, is it worthwhile for a country in the vicinity of a large monetary zone the euro zone or the dollar zone - to try to conduct an autonomous monetary policy? switzerland ’ s tradition of financial stability many people outside switzerland think that financial stability should be added to the list of swiss specialties like chocolate, watches and banks. indeed, the fact that switzerland is the only country that has been able to keep unchanged its set of coins in circulation since the franc was created in 1850 speaks for itself. even more spectacular is the position of the swiss franc, which has retained its international purchasing power over time. the swiss franc has been devalued only once, in 1936, during the great depression, following the devaluation of all major currencies. financial stability has contributed to shape switzerland ’ s business environment and, to a certain extent, explains some of the typical features of the swiss economy. for example, with about 32 % of gdp, the swiss saving rate is among the highest in the world. some of these savings are channelled abroad via our banking system, and their proceeds guarantee us a very strong balance of payments position. as a matter of fact, switzerland ’ s current account is almost endemically positive. as the counterparties to large positive current accounts are, by definition, large negative positions in the capital account, switzerland has become a net creditor to the rest of the world. contrary to the popular belief that my country is the ultimate recipient of other countries ’ savings, switzerland is in fact a traditional net exporter of capital. by and large, our current account surplus amounts to 13 % of gdp. although portfolio investments remain the preferred channel for investing abroad, foreign direct investments have, in line with the process of globalization, increased steeply in the last ten to fifteen