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Business News

EU Debt Crisis Causes Swiss Franc Surge

EU Debt Crisis Causes Swiss Franc Surge
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2 min read

You're reading Entrepreneur Middle East, an international franchise of Entrepreneur Media.

The Swiss National Bank (SNB) might as well hit the panic button, as the Swiss franc is feeling the heat from the Eurozone debt crisis. The Swiss franc’s value soared, following a huge increase in demand for the currency. A strong franc is not in the interest in the best interest for the Swiss simply because Switzerland’s economy relies massively on exports, and an expensive franc will repel buyers. For over three years, the Swiss National Bank has maintained a currency cap against the euro, in order to keep the currency from deflating and to maintain its pivotal export economy. All that has changed, though. While the bank was adamant on maintaining the cap, there have been concerns about the costs of doing so, which requires the SNB to buy assets in foreign currencies leading them to put an end to it. This problem is affecting many Europeans outside of Switzerland too, notably in Poland, Hungary, Croatia, and Austria. Many people were encouraged to take out Swiss franc mortgages. After abandoning its currency cap, the Swiss franc’s value increased to a value 21% stronger than the Polish zloty. This means that these homeowners have a greater amount to pay in mortgage loans. About 566,000 Poles are going through this problem right now, with 37% of all mortgages being Swiss franc-denominated. There is much cause for concern, and the entire eurozone is watching.

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