December 22, 2008 / 1:34 PM / 10 years ago

Swiss in for a Merry Christmas after all

ZURICH (Reuters) - The fairy tale tram rattles along Bahnhofstrasse, Zurich’s posh shopping street, beneath the twinkling Christmas lights as if this was just any other year.

A man dressed as Santa Claus drives the Maerlitram tram in Zurich December 20, 2008. REUTERS/Arnd Wiegmann

Inside the tram, children listen to tales of Santa Claus, outside their parents rush from shop to shop, loaded with bags, ignoring the tales of global economic doom and gloom.

Retailers are rejoicing about record sales and a table in restaurants is as hard to get as a hotel room in ski resorts.

While recession has already turned into the nightmare before Christmas elsewhere, the Swiss are still enjoying the benefits of a five-year long boom which has added thousands of jobs and boosted wages in the already prosperous country.

“I am still shopping and will continue to do so,” said Edith Weibel Sovilla.

“I, personally, have not felt any impact from the crisis, but I am watching it and will watch it in the future,” the communications worker said whilst browsing in a posh Max Mara shop in Zurich.

The Swiss will ultimately not be able to just shop away the recession, which the government expects to be the worst since 1991 as demand from elsewhere in the world slows, weighing on exports, the country’s main driver of growth.

But the $490 billion economy, which some feared might face an Iceland-style meltdown after the subprime-related writedowns of its largest bank UBS of some $50 billion, appears to be in pole position to make it through the crisis as a winner.

“Switzerland has got almost everything right over the last five years,” said Holger Schmieding, European chief economist at Bank of America. “They are now well placed to weather the recession and to be at the forefront in the next recovery.”

The Swiss economy has grown faster than the euro zone over the last five years and while the Swiss government sees the economy shrinking by 0.8 percent next year, many forecasts for the euro zone and the United States are much more depressing.

“The recession in Switzerland will be less deep than in the euro area,” said Andres Fuentes, the Organization for Cooperation and Development’s (OECD) expert for Switzerland.

The 7.6 million Swiss are among the world’s highest per capita earners and the country of snow-capped mountains and crystal-clear lakes tops international rankings when it comes to quality of life as well as economic competitiveness.

Even 18 months into the crisis, the country is close to full-employment with a jobless rate of just 2.7 percent.

Many of its high-quality products ranging from watches, chocolate and medicines to solar cells and machinery, look better positioned to weather the downturn than other branches such as Germany’s and America’s car industry.


Even the hard-hit Swiss banks might make a successful comeback once the crisis ebbs.

“I do not see real winners (globally) only more or less bruised losers,” said banking professor Beat Bernet from the University of St. Gallen. “Our competence in wealth management could help to reposition Swiss banking anew and even stronger.”

UBS and Credit Suisse, Switzerland’s number two bank, hold liabilities worth seven times Switzerland’s GDP and as the crisis heightened, fears rose that the country might falter if one of the two collapsed.

But Schmieding said the risk was limited thanks to the country’s focus on wealth management. “The most stable part of the global financial sector is based in Switzerland, a country people trust. They will not pull money out in a crisis.”

Swiss National Bank Vice-Chairman Philipp Hildebrand has said the traditional, prudent Swiss banker should make a strong return in the post-crisis world.


The Alpine country is in much better shape after surviving its own crisis in the 1990s, when a real estate crash and the people’s close rejection of European Union entry weighed heavily on the economy.

Since then, however, an “EU-a-la-carte” policy has helped to shore up the Swiss economy’s resilience by opening it up to the 27-country union while leaving room for tailor-made reactions to the crisis.

The Swiss signed a number of agreements with the EU, easing its exporters’ access to the world’s largest market. The country has opened its labor market to workers from the EU completely.

Tens of thousands of skilled professionals like engineers, nurses and architects have poured into Switzerland since, which has boosted the housing market, filled the government’s tax coffers and fueled consumer spending.

The open economy has also forced companies to stay lean even during fat years. “I am convinced that we are in much better shape (than in the 2002/2003 downturn),” says Thomas Daum, director of the Swiss employers association. “Companies have put on some muscle again.”

Many Swiss stocks are among safer bets in the industrialized world and defensive picks such as drugmaker Novartis or food-giant Nestle helped the blue-chip index SMI to outperform other major markets.

Slideshow (3 Images)

The Swiss franc has also gained in value during the crisis, reflecting investors’ trust in the country as a safe haven.

But the fiercely independent Swiss have also benefited from staying out of the EU as the Swiss central bank kept interest rates much lower than in the euro zone and pulled a bailout out of the drawer for UBS without political wrangling.

The Swiss have kept trust in their financial institutions despite much domestic criticism about UBS. In a recent survey banks came third in a list of institutions Swiss trust, with only courts and police ranking higher.

Additional reporting by Katie Reid; Editing by Jon Boyle

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