Soaring Swiss franc puts squeeze on German enclave

Fri Sep 2, 2011 1:59pm EDT
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By Catherine Bosley

BUESINGEN, Germany (Reuters) - Since a 19th-century treaty established a German village wholly within Switzerland, the people of Buesingen have become accustomed to navigating between Berne and Berlin.

Yet for the residents of this leafy village of 1,400 on the banks of the river Rhine, the record-strong Swiss franc is generating even more heat than the summer sun.

Buesingen has both a Swiss and German postal code, and in front of the mayor's office there are both German and Swiss telephone booths. Swiss sales tax applies in the handful of shops, though politically the village belongs to the German state of Baden-Wuerttemberg.

Rents and groceries are generally quoted in francs. But some residents receive pensions in euros, and income taxes are paid at German rates, well above those standard in Switzerland.

Mayor Gunnar Lang said about 10-20 percent of the village's residents are feeling the pinch due to the runaway Swiss currency, which has shot up 30 percent against the euro since the collapse of Lehman Brothers in 2008 at the height of the global financial crisis.

About 100 people have in recent years chosen to leave Buesingen and move to Switzerland, to take advantage of lower taxes. With the franc not far from parity with the euro, still more may go.

"That's leading those who are still here to start thinking about whether they should move to Germany too. That's really bad for Buesingen," Lang said, adding that the most frequent complaints were of rising rents and people being pushed into higher tax brackets with no change to their real income.

In Switzerland, the strong currency is beginning to throttle the economy: exports are softening, corporate profits are slipping and politicians are warning of rising unemployment.   Continued...

<p>A general view shows the German village of Buesingen August 25, 2011. REUTERS/Arnd Wiegmann</p>