Switzerland in the Financial Crisis Switzerland as has been the case with many countries around the world has been hit by the global recession of the ear ly twenty first century. Marked by decreases in GDP, industrial production, and consumer demand as well as an increase in unemployment the Swiss economy was marked with a recession starting in late 2 008. 1 However economic indicators have shown that in comparison to other OECD countries that Switzerland may have not been hit as hard as others by the recession and may b e showing signs of recovery as early as the third quarter of2009. One of the main indicato rs of Switzerland is GDP. Graph one show¶s us the percentage change in GDP when compared to the corresponding quarter of the previous year. Graph 1: Swiss National Bank Monthly Statistics By analyzing the graph one can see a large dip in GDP from 2007-2008 which marked the beginning of the recessionary period. From the third quarter of 2008 u p until the first quarterof 2009 GDP from 3% to -2.5% which is one of the largest drops in GDP in recent years. If we 1 http://www.fo rbes.com/2009 /03/03/s witzerland-banks-ex ports-markets-econ omy-recess ion-25.html (Switzerland saw two consecutive quarters of negative growth in the final six months of 2008)
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role of the SNB first is to ensure price stability which with such a low rate
may cause some deflation of prices which is something the SNB will have to
account for in the future.
The SNB also introduced some other policies to help tide the storm such as
extending maturities on repo transactions and communicating to it¶s
participants its desire to lower the LIBOR. And finally to combat the demand
for FRANCS from other countries and to cease a large outflow of it¶s currency
further devaluing it¶s currency it created swap agreement with the Central
Bank of Hungary, National Bank of Poland, and the European Central Bank.
(P.43)
Banks and analysts agreed that threats to the industry persist, predicting massive job losses over the next year and ahalf and larger global banking losses from the deterioration of the U.S. housing market.
UBS AG announced the surprise departure of its chairman and forecast losses and write-downs of approximately $19billion in the first quarter. That puts its write-downs for the past nine months at $37.4 billion -- the most reported by
Thomas Jordan, Member of the Governing Board of the Swiss National Bank
erfa-Gruppe, Weinfelden, 15.01.2009
Complete text in German: Perspektiven für die Schweizer Wirtschaft 2009 PDF [814 KB]
Following a long, strong and broad-based growth phase, the world economy moved into a major recession in mid-
2008. About a year after the beginning of the unprecedented financial market crisis, there was a radical turnaroundin the global economic outlook. The European and Asian economies were not disconnected from the US, as had
been hoped. The Swiss economy leans heavily on its export and financial sectors and faces a difficult year. Arecession appears unavoidable in 2009.
Consequently, the skilful deployment of monetary and fiscal policies as well as optimal conduct on the part of business practitioners in Switzerland are particularly important. Monetary policy can be changed quickly and its
impact is relatively rapid through its influence on interest rates and the exchange rate. The SNB has reactedresolutely to the deterioration in the economic situation and has reduced interest rates to almost zero. If
necessary, monetary policy can be rendered even more expansionary through a series of alternative instruments.
In the case of fiscal policy, the focus is on effective automatic stabilisers ± first and foremost, allowing the
occurrence of temporary budget deficits, together with unemployment benefits and compensation for short-timeworking. In view of the extent and risks of the current crisis, fiscal policy will need to consider and prepare the
deployment of additional stabilisation measures alongside the automatic stabilisers.In addition to the increased focus on economic policy, business practitioners within the Swiss economy are also
challenged. In the case of banks, it is essential that credit shortages for companies and private households beavoided. Moreover, interbank business needs to be strengthened in order to smooth out liquidity imbalances.
Companies must enhance their innovativeness and use opportunities for opening up new markets. The Swisseconomy has many structural strengths and this prompts confidence that Switzerland will overcome the crisis.
GENEVA ² Two of Europe's largest banks, UBS and Deutsche Bank, disclosed Tuesday that they are writing downbillions more in bad investments, reflecting the unrelenting wave of woe from the U.S. subprime crisis.
Banks and analysts agreed that threats to the industry persist, predicting massive job losses over the next year and a
half and larger global banking losses from the deterioration of the U.S. housing market.
its expected first-quarter profit, while Lehman Brothers Holdings Inc. this week was the latest in a string of U.S.-based
banks to seek fresh capital.
UBS, which has already cut more than 1,500 jobs so far, is set to cut more, Chief Executive Marcel Rohner said
Tuesday. He did not say how many.
Ospel, who had indicated earlier that he wanted to stay another year, became the latest victim of the crisis at UBS,which last year ousted its chief executive and other top executives.
"I have always stated that I ultimately take responsibility for the bank's situation," Ospel said in announcing that he
would make way for general counsel Peter Kurer to become chairman.
UBS said that after it raises new capital, its Tier 1 capital ratio, a key indicator of a bank's ability to absorb losses,
would be about 10.6 percent. That is well above minimum European requirements of 4 percent.
The bank said its exposure to U.S. subprime mortgage-related positions fell to approximately $15 billion from $27.6billion on Dec. 31. Its exposure to Alt-A positions -- less risky than subprime loans -- was cut to $16 billion from $26.6
billion, it said.
UBS also said it would create a new unit to "hold certain currently illiquid U.S. real estate assets."
The bank posted a loss of more than $11 billion for the fourth quarter of 2007 after writing down about $13.7 billiontied to U.S. subprime mortgages. It posted a net loss of 4.38 billion francs for 2007, its first annual loss.
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