their national currency. since any major decision in switzerland has to be approved in a public referendum, the prospect of eu and euro membership in the near future is thus highly unlikely. given our exposure to global economic and financial shocks, and their arguably smaller importance for the euro area, pegging the swiss franc to the euro is not a realistic option. flexible exchange rates give us the room for manoeuvre we need. • what has our experience been of coexistence with the euro so far? very positive. rather than crowding out independent currencies, the euro has stabilised the monetary scene in europe. in fact, the franc is less volatile today than it was before european monetary integration. the price of the euro in swiss francs these days is about 3 % lower than it was in 1999, in other words, almost unchanged. we did have periods, however, when the franc was under pressure, especially after september 11 and before the outbreak of the war in iraq. the safe - haven function of the franc then triggered a 10 % appreciation in our currency against the euro. as a consequence, we had to conduct a more aggressive interest rate policy than the ecb in order to lower the attractiveness of our currency and give some leeway to our economy. things have normalised since then and we have already lifted interest rates on four occasions in the last two years. as you can see, we conduct our monetary policy independently of the ecb. 2 / 3 i'm sure you will agree, that switzerland is most definitely not an isolated island, as many still believe. it is clearly an open economy which has chosen to take up the challenges of the world economy. large swiss firms invest more money and create more jobs abroad than at home. switzerland has become a major investor not only in europe, but also here in the united states, as well as in asia. today, there are 4. 2 million jobs in switzerland and we count 1. 8 million people working in swiss firms abroad. apart from singapore and hong kong, there is no other country where foreign investments play that kind of leverage role. actually, switzerland is not an alpine fortress, but a home base for globally active industries … … in keeping with the long - standing tradition of watchmakers and chocolate producers! 3 / 3

these claims can be exchanged one - to - one for central bank money, i. e. banknotes in the case of non - banks. economic agents are prepared to hold bank deposits instead of central bank money as long as they have confidence in the bank ’ s ability to pay and as long as the bank deposits offer them added value compared with central bank money. for instance, bank deposits facilitate the settlement of transactions – most of us would probably find it highly impracticable if wages and rent had to be settled in cash, for example. bank deposits also offer protection against theft and are often a better means of preserving value than central bank money in that they normally generate a return. however, they do entail a certain degree of credit risk. in switzerland, bank deposits account for more than 90 % of the money held in swiss francs by households and companies, with less than 10 % being held in banknotes. it is therefore not enough for just central bank money to be sound money ; bank deposits must be sound as well. when is central bank money sound money? but let us first consider the money that serves as the anchor of our monetary system. these days, central bank money is paper money : 4 there is no defined obligation as regards convertibility into gold, which makes the issuing of money completely flexible. 5 this brings considerable advantages. it allows central banks to adjust supply in line with demand and thus to keep the value of money stable over time. 6 thanks to this flexibility, in crisis situations a central bank can make an important contribution to damage limitation by supplying additional just over two years ago, the swiss electorate rejected the sovereign money initiative and its proposed change to a system based purely on central bank money. prior to the vote, the snb had also highlighted the disadvantages of such a move. cf. inter alia jordan, thomas j. ( 2018 ), how money is created by the central bank and the banking system, speech at zurcher volkswirtschaftliche gesellschaft, zurich, 16 january, and jordan, thomas j. ( 2018 ), why sovereign money would hurt switzerland, speech at the swiss institute of banking and finance at the university of st. gallen, st gallen, 3 may. in addition to central bank money, the coins issued by the confederation are also legal tender. paper money is used here in the traditional sense as a synonym for fiat money, i. e. the opposite of money backed by precious metals ( metallic money )