situated at the very heart of europe but remaining outside the european union ( eu ) has benefited from the continued process of european integration. there are a host of examples to illustrate this. the bilateral agreements switzerland concluded with the eu in 1999 and 2004 would have been very difficult to reach with 27 individual nations. among other things, this has led to greater immigration from the eu. despite initial fears here in switzerland, open and integrated labor markets between the eu and switzerland have clearly given the swiss economy a welcome boost in recent years. indeed, private swiss firms and even semi - public sectors like health care have reaped substantial benefits by drawing on the supply of large numbers of highly skilled immigrants from the eu member states and in particular from germany. moreover, this has not come at the expense of swiss workers. recent research actually suggests that the immigration from the eu during the last couple of years has narrowed the wage differential. 1 immigrants have also been an important source of demand during the financial crisis. they are clearly one of the reasons why switzerland ’ s economy has weathered the financial crisis relatively well. indeed, switzerland is one of the very few developed countries where private consumption remained a steady source of growth virtually throughout the entire financial crisis. 2 a particularly relevant benefit directly linked to the introduction of the euro pertains to exchange rate volatility. after the introduction of the euro and before the peak of the financial crisis in 2008, the average euro – swiss franc volatility was roughly 30 % lower than the prevailing deutsche mark – swiss franc volatility in the 1990. the compression in exchange rate volatility is significantly larger if one takes the lira or the peseta or any of the other peripheral european currencies as a reference point. with the mounting concerns in financial markets over the ability of several, mainly peripheral european countries to handle their public debt level, the situation has evolved significantly. exchange rate developments became a challenge for the swiss national bank ( snb ). with interest rates at zero and limited means to further expand monetary policy through other quantitative easing channels, exchange rate interventions were a necessary unconventional monetary policy tool. the snb made it clear that it would fight off “ safe haven ” flows out of the euro in accordance with its objective to prevent deflationary risks from materializing by way of an excessive appreciation of the swiss franc. this strategy of fighting off deflation risks has yielded the intended results. the deflationary risk in switzerland has largely disappeared and the

jean - pierre roth : the position of the swiss franc exchange rate in the swiss national bank monetary policy strategy summary of a speech by mr jean - pierre roth, chairman of the governing board of the swiss national bank and chairman of the board of directors of the bank for international settlements, at the university of st. gallen, st. gallen, 19 december 2007. the complete speech can be found in german on the swiss national bank ’ s website ( www. snb. ch ). * * * the exchange rate is an important factor in determining the domestic price level in switzerland. nevertheless, it is not a monetary policy goal for the swiss national bank and is only relevant insofar as it has an impact on future inflation. our concerns about our currency's weakness should not be read as a hidden form of exchange rate policy but rather as genuine concern about future price stability. a sustained tendency to weakness on the part of the swiss franc could trigger inflationary effects that – sooner or later – would have to be countered with monetary policy instruments taking the form of interest rate measures. in the medium - term, this could lead to a reduction in the interest spread between the swiss franc and the euro.