Gross domestic product

Length: 959 words

In Sitter’s argument, it is being stated how Euroscepticism should be seen in the light of the general opposition, since it carries a force wherein “anti-Europeanism can be inextricably bound up with a systematic challenge to the existing political establishment” (Church, 2003, p. 5). This should not be ignored, especially that the opposition carries implications for the EU, as Switzerland according to Church (2003) “matters more to the wider Europe than is sometimes realized” (p. 5).

As it uses direct democracy in the establishment of its politics, it has the ability to affect the continent’s wider evolution, as indicated by Church (2003, p. 5). It is in contrast with the Eurosceptic views in the light that there is much broader Swiss resistance to the outside entanglements. The Swiss Franc Exchange rate regime. The central banks and supervisory authorities constantly assess the banking sector, being an important element of the financial system of the country.

Banking crises and their determinants have to be evaluated, including the binary variables that signal a crisis but are less suitable in depicting the condition of banking sectors. In relation to the exchange rate regime, Switzerland follows the same index that defines the banking sector’s condition, while defining the

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level of stress, which in relation to the global exchange rate, would give the banking sector the exact rate that should be used. As of now for example, the exchange rate of Swiss Franc to the American dollar falls at 0.936 per 1 CHF (Exchange rates table for Swiss Franc, 2009, p. 1).

Stress index, on the other hand, draws information on the economic environment and macroeconomic imbalances, which carries the potential of affecting the condition of the banking sector, as well as, the exchange rate in relation to the country’s total GDP. As for the condition of the banking sector of Switzerland, it has been informed that the country has been cutting sizes of biggest lenders in relation to its central bank just this June 2009 (Hughes & Jenkins, 2009, p. 1).

The shrinking of banking groups like the UBS and the Credit Suisse contain some risk to Switzerland, and this event come in relation to the constraint of global economic crisis that has been occurring these years. The country therefore, looks at “imposing constraints on the size of the biggest domestic banks unless global policymakers can come up with a system to deal with large banks when they fail” (Hughes & Jenkins, 2009, p. 1). The last few years had been impenetrable, and Swiss National Bank points out that, given their experiences these past few years, large international banks have long exceeded their supposed size.

• these past few months, or specifically since January 2009, we see that the lowest come on February 2009, wherein exchange rate dropped to 0. 857778 per US dollar; while the highest arrived on July 2009 wherein exchange rate reached 0. 926083 per US dollar (Monthly average graph, 2009, p. 1). As for the past 120 days, we see that the lowest exchange rate come on March 12, 2009 wherein the exchange rate dropped to 0. 839539 per 1 CHF in the dollar rate; the highest, on the other hand, happened on June 2, 2009, when Swiss exchange rate climbed to 0. 94061 per 1 CHF American dollar (Exchange rates graph, 2009, p.1).

American Dollars to 1 CHF (invert,data) Table 3: Exchange rate of the Swiss Franc to the American dollar (Exchange rates graph, 2009, p. 1) The development of the Swiss Franc involves spending by some external demand, as well as, the acceleration of consumption due to some significant forces. Rising stock-market indices and strong increases in the market turnover indicate lower interest rates that support lending activity. Increased immigration in terms of the Swiss case, contribute to the significant expansion of labor supply and the decrease of unemployment rate, which has fallen by 2.6% as of 2007

(Organization for Economic Cooperation and Development, 2007, p. 4). Rise in immigration level reflect the success of the agreement between Switzerland and the European Union regarding the free mobility of workers back in 1999. All these forces support the increased development of the Swiss Franc, together with economic growth and global intercession. Although inflation could, by some varying degree, affect the Swiss Franc in relation to increasing demand, this can be counteracted by the downward trend of the exchange rate of Swiss Franc, ones it proves to be successful.

The Organization for Economic Cooperation and Development (2007) stated, “In any case, there seems little reason to expect any significant decline in the long-standing but also surging current-account surplus, which has reached more than 15% of GDP” (p. 4). The continued weakness of the Swiss Franc may have been the result of the ‘carry trade’ that is about to reverse, as stated by the OECD (2007). • Problem with the Swiss economy. The stress of the banks have something to do with the fluctuations from which the banking sector’s condition vary from low level to tranquil to high level of stress.

There is high stress in Switzerland in the beginning of the 1990s when there was restrictive amount of major restructuring and takeovers in the regional banks; also, in 2001 and 2002 when the stock market plunged the Swiss economy downward to a crash that halted the country’s development, especially in terms of the economy. These two had been the most stressful, leading to a negative impact on the economic environment, as well as, producing macroeconomic imbalances on stress.

With these two factors, the Swiss banking system has become more prone to crises and stress, which has made the economy vulnerable and weak. In June 2009, Haig Simonian (2009) indicated how the Swiss economy has shrunk at fastest rate in years. In the report, Gross domestic product declined by 0. 8 percent in the first three months, compared with the previous quarter, in the sharpest three-month drop since 1992. Measured year on year, the decline amounted to 2. 4 percent, the biggest reduction since 1976, according to the state secretariat for economic affairs. (Simonian, 2009, p. 1)

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