the new european currency would destabilize the swiss franc. in the past, the swiss franc, along with the german mark, played the role of a safe haven currency whenever monetary crises occurred. with the disappearance of the german currency, the swiss franc would find itself first in line of fire in case of a dollar crisis, for example, or even worse, in case of doubts about the stability of the european currency. b ) second, we risked seeing the euro being increasingly used as a means of payment in switzerland. as the common currency was about to become the main unit of account for our exports, we feared that domestic firms might adopt the euro as well, so as to minimize exchange rate risks. some were even considering wages being paid in euro. if use of the franc were to be crowded out by the euro, the swiss national bank would have had little leverage left to influence monetary conditions in switzerland. it would become a sort of paper tiger! c ) third, even short of a full “ euro - ization ” of the swiss economy, we feared the loss of our monetary policy autonomy. given the importance of the common currency for the swiss economy, what else could the swiss national bank do other than follow the european central bank ’ s policy and de facto integrate the franc into the euro zone? a gradually shrinking interest - rate differential between euro and swiss franc investments as well as a loss in monetary autonomy would have resulted. how does our recent experience relate to these concerns? 3. our experience as an independent monetary entity a ) the euro / swiss franc relationship our fears of a euro destabilizing the swiss franc did not materialize. relative to the euro, and since its introduction, the franc has been fluctuating in a relatively narrow band of plus or minus 5 percent, about four times less than against the dollar during the same period. the swiss franc appears now to be less affected by exchange rate shocks and more shielded from speculative movements. in the past, the franc was overreacting to the dollar ’ s fluctuations, so that the pain of an appreciation of our currency relative to the greenback was exacerbated by a simultaneous appreciation of the swiss franc relative to the german mark. this double whammy effect, attributed to the narrowness of the swiss franc market, was highly penalizing for our export sector. since the introduction of the euro however, this pattern is no longer observed.

jean - pierre roth : swiss franc and euro - two sister currencies? speech by mr jean - pierre roth, chairman of the governing board of the swiss national bank, at the swiss - brazilian chamber of commerce, sao paulo, 19 november 2004. * * * it is a great pleasure for me to talk to you today about the swiss franc and the euro after six years of monetary integration in europe. looking at the map, you might wonder whether switzerland, a small spot in the middle of euroland could still follow an autonomous monetary policy. what are the consequences of the introduction of the euro on the swiss franc and on the effectiveness of swiss monetary policy? and what are the effects of this new international monetary order on countries outside the dollar - euro block more generally? i will try to provide some insights on these questions today. first, i will present the change in our monetary framework due to the creation of the euro. then i will enumerate the main fears that we originally had regarding the effects of that transformation, and our experience with the new environment. finally, i will share some lessons on the influence of the introduction of the euro for the international monetary system and for the autonomy of switzerland ’ s monetary policy. 1. a new international framework january 1, 1999, constituted a true revolution for europe. many observers argue that the introduction of the euro represents the major postwar stage in european integration. they are right. the maastricht treaty, by removing national currencies and defining budgetary rules, leads to an important transfer of power from national capitals to european institutions. the french franc, the italian lira, and the german mark were all symbols of national identity. the euro is now playing an integrating role in people ’ s minds. in this regard too, the new currency brings a revolutionary dimension. remember that national currencies were almost always and everywhere brought about by fundamental political changes : the french franc was the “ franc germinal ”, the italian lira was created on the occasion of the italian unification, and the reichsmark appeared in 1873 at the foundation of the german empire. these are very strong political symbols indeed. for switzerland too, the introduction of the euro was a kind of revolution. for the first time in our history, our country was completely surrounded by a single currency area. in terms of population, switzerland, with its 7 million inhabitants, could be compared to missouri in the middle of the united states.