Swiss woe as euro hits cloud cuckoo land
Published 04/09/2011 | 05:00
Bijan Vafi's business should be booming. His company, Loetscher, is the world's only manufacturer of Swiss cuckoo clocks, carving elaborate chalet-style creations that are the ultimate Alpine souvenir.
But now, after more than 90 years of fashioning precision timepieces, the clock may be ticking on Loetscher's own future. "Our exports are down 38 per cent, and that's a large part of our business," said Mr Vafi, 61. "The situation is extremely fragile."
From the picturesque lakeside village of Brienz, flanked by dramatic Alpine peaks, the pretty wooden-fronted factory manufactures 30,000 clocks a year, 40 per cent of them exported. Yet the soaring Swiss franc has meant that his clocks are becoming rapidly more expensive.
As fears over the stability of the euro continue, investors are looking to buy into "safe havens" -- secure, trustworthy investments such as gold or the Swiss franc -- which has caused the currency to rise 20 per cent against the euro this year and 30 per cent against the dollar.
And with US customers now finding his products almost a third more expensive, they are choosing to take their business elsewhere.
"For the market in the States, the consequences have been enormous," he said sadly. "Our staff are highly skilled, so we don't want to fire people, and living costs remain high so we can't cut wages but what can we do?"
Fears of joblessness and hard times are rare in this Alpine nation of 7.8 million people. While per capita GDP remains one of the highest in the world at almost $76,000 (€54,000), the record exchange rates are causing an unusual level of concern.
"It's kind of a paradox," said Andre Simonazzi, a Swiss government spokesman. "We have a situation where we are suffering because the Swiss economy is strong."
Exports tumbled by about four billion francs (€3.5bn) in June, and exports to the EU, the country's most important trading partner, were down almost 15 per cent.
Jean-Christophe Schwab, central secretary with the Swiss Federation of Trade Unions, warned recently that 10,000 jobs could be lost due to the overvalued franc.
It is also bad news for foreign tourists, for whom a trip to Switzerland is now even more eye-wateringly expensive than it was. US visitors find that their dollar will now barely buy a packet of chewing gum, while in Geneva, a Starbucks coffee will leave little change from $10 (€7).
And from cuckoo clocks to cheeses, via watches and chocolate, the emblematic exports of Switzerland are becoming less affordable.
Sales of emmental cheese, known in the US as Swiss Cheese, are plummeting. The 270-year old Emmental Show Dairy has cut production by a third. The company is earning 5.5 Swiss francs per kilo, down from 7.8 francs per kilo last year, and in the future, said Adrian Zehnder, the dairy's business manager, they may produce only a few wheels of cheese a day to show tourists.
"We are really coming close to our break-even point, which is around 5.30 francs," Mr Zehnder said. "Then we really have to think about stopping our production."
Roger Guye's chocolate shop, on the banks of the river Rhone in Geneva, depends on exports for 40 per cent of its business but they're in decline.
His hand-made wares include chocolate-covered dates that sell for 140 francs (€123) per kilo in the Middle East. "Ramadan has hit us in August, too, so there are fewer Middle Eastern tourists," he said.
There is also a decline in exports for the Swiss watch industry, the country's third largest behind chemicals and engineering, which employs 49,000 people and has an annual turnover of 16.2 billion Swiss francs (€14.4bn).
Thousands of residents of Geneva -- and other towns close to the German, Austrian and Italian borders -- now cross into the eurozone to do their weekly shopping.