January 22, 2012 / 11:33 AM / 6 years ago

Swiss econony minister sees franc weakening midterm: paper

ZURICH (Reuters) - Switzerland’s economy minister Johann Schneider-Ammann expects the Swiss franc to weaken to about 1.40 francs per euro in the medium term, he told a Swiss newspaper on Sunday.

Swiss Economy Minister Johann Schneider-Ammann speaks during an extraordinary Parliament session on the Swiss Franc in Bern, December 21, 2011. REUTERS/Michael Buholzer

“My minimum expectation is that the Swiss National Bank keeps the lower boundary of 1.20 (francs per euro),” he told SonntagsZeitung. “In the midterm I expect purchasing parity to be reestablished. It lies at about 1.40 francs per euro.”

The SNB set a cap at 1.20 francs per euro on September 6 to put a halt to the appreciation of the Swiss currency that threatened to tip the Alpine country into recession.

“The risk of a deindustrialization is still there at 1.20. Smaller and midsized companies cannot invest or replace staff,” Schneider-Ammann said in the interview.

The franc has been trading in a range of 1.20-1.25 francs per euro since the SNB set its cap. It has gained ground towards the cap since central bank ex-Chairman Philipp Hildebrand stepped down in the wake of a scandal at the beginning of the month.

“The franc’s strength has nothing to do with Mr Hildebrand’s resignation. It is rather the downgrades by rating agencies that have led to uncertainty, pushing many towards the Swiss franc.”

Schneider-Ammann stressed the SNB was independent and remained capable of acting despite the recent crisis.

Swiss industry representatives have repeatedly called for a shift in the euro-franc floor to 1.30 or even 1.40 but Hans Hess, president of industry lobby Swissmem, told SonntagsZeitung in a separate article this scenario was less likely at present.

“The risk of not being able to maintain an exchange rate of 1.30 francs per euro is much bigger than the risk of failing at 1.20,” he said, adding that a shift would also mean acknowledging that the September move was not sufficient.

“That would harm the SNB’s credibility in international markets that would certainly massively test this new floor.”

Gerold Buehrer, head of business lobby economiesuisse who had called for a shift in the cap in the past, said: “The SNB has to defend the rate of 1.20 at all costs, a shift to 1.30 would be difficult given the unsolved euro zone debt crisis.”

Only Swiss trade unions continue to plead for a shift in the franc cap, SonntagsZeitung reported.

Reporting by Silke Koltrowitz; Editing by Hans-Juergen Peters

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