Bond Outlook [by bridport & cie, September 3rd 2008]
| Are we living in an economic oasis in Switzerland? While all around, economies are slowing, house prices falling, consumer prices rising, Switzerland is enjoying low unemployment and inflation, and steady expansion. In many ways the country is bursting at the seams, with multi-nationals moving into “Romandie”, and German nationals moving into the Zurich area. There is an acute shortage of housing. When last time (beginning end 1989) housing prices collapsed elsewhere in Europe, Switzerland went through the same thing, but this time things look different (always a dangerous utterance!). Even the UBS’s position at the head of the list of banks losing money from sub-prime is being calmly absorbed by the Swiss finance industry. The Federal Banking Commission is now imposing higher bank capital requirements to ensure better protection in the future. Chemicals, watches, machine building and tourism, plus the presence of so many international headquarters, are keeping the current account positive and the CHF solid without being too strong. |
| Opening the labour market to citizens of the European Union is a major cause both of the economic expansion and the housing shortage. |