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Switzerland

Capping The Franc: A Daring Move In Zurich

Op-Ed: In a surprise move, Switzerland’s central bank has de facto linked the country’s currency to the fate of the euro. Risky as it is, the bold move is welcomed in a country increasingly united by a common fear of recession.

Swiss francs (Radar Communication)
Swiss francs (Radar Communication)
Wolfgang Koydl

ZURICH - Theatricality, drama – any extravagant display of feeling -- is certainly not a Swiss thing. So while the news this week that the franc would be capped at 1.20 against the euro produced gasps of surprise on international financial markets, the Swiss National Bank made the announcement with barely more than a nod of the head. The step was courageous. It was also necessary.

It has to be the most understated move of the year, because the daring maneuver on the part of the central bank's Governing Board and its chairman Philipp Hildebrand has propelled Switzerland into an economic adventure -- the outcome of which is anything but certain. Strictly speaking, the Swiss did not couple their currency to the euro. What did happen, however, is that Switzerland‘s fate just inched a little closer to that of the EU and its joint currency, without the Swiss gaining any greater say in policy.

That means that henceforth, whether prices in Switzerland rise, pensions fall, interest rates go south, or rents skyrocket: it will all depend just that much less on independent measures, decisions, or resolutions taken in Bern or Zurich. The determining factor at the end of the day will be the course of the euro's rollercoaster ride on global financial markets – and that can't be calculated ahead of time. Or, to choose imagery a little closer to the Alpine nation: it's as if an experienced Swiss climber who, up to now, had the mountain to himself is now scaling with his rope tied to a bunch of tourists wearing T-shirts and sandals.

At this moment, the Eurozone is relatively quiet, and currency markets have set the value of the single currency against the franc exactly where Switzerland's bankers want it. But what happens if there are new catastrophes down the road? What if Greece goes bankrupt, Germany doesn't want to pick up the tab anymore, or a major European bank goes under? Is the dam the Swiss have erected strong enough to hold? Or will a stampede of speculators flock to the secure franc despite attempts by Switzerland's currency watchdogs to scare them off? The daily volume of euro-franc transactions is worth $72 billion. If there were to be a stampede, the Swiss National Bank would have to come up with astronomical sums to buy weak euros – day after day, for an unforeseeable length of time.

Theoretically, and probably practically as well, the Swiss National Bank could stand up under the pressure for quite awhile. They would just have to mint ever increasing amounts of francs and flood the market. The consequences of that, however, would be inflation -- and since price rises would be, so-to-speak, imported from the unpopular EU, that would not make the issue any easier to deal with politically on the home front.

Right now, the country stands behind its currency watchdogs. "Relieved" are not only companies, but also business and commercial associations, which were having trouble selling their products abroad because of the strong franc. "Satisfied" are also the Greens, Social Democrats -- and unions, because employees are increasingly being asked to work more hours or take pay cuts in exchange for companies not pulling up stakes and moving abroad where labor and materials are cheaper.

The fear of a recession unites the nation. Some may perhaps derive a frisson of self-importance at the idea of their small country all alone against powerful financial markets. Secretly, they‘re a little scared. But of course they'd never show it.

Read the original article in German

Photo - Radar Communication

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Geopolitics

Modi Is Wrong: Russia's War Also Creates Real Risks For India

By shrugging aside Russia’s aggression, India has shown indifference to fears that China could follow Russia’s example.

Photo of India's Prime Minister Narendra Modi and Russian President Vladimir Putin

India's Prime Minister Narendra Modi Visits Russia

Anita Inder Singh*

-OpEd-

NEW DELHI — India is wrong to dismiss Russia’s war in Ukraine as Europe’s problem. The illegality and destructiveness of the invasion, and consequential food and energy crises, have global ramifications.

Stay up-to-date with the latest on the Russia-Ukraine war, with our exclusive international coverage.

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This explains why 143 out of the 193 member-states of the UN General Assembly voted against recognizing Russia’s illegal annexation of four Ukrainian regions after holding sham referenda there. Ninety-three voted in favor of expelling Russia from the UN Human Rights Council.

India has abstained from every vote in the UN condemning Russia’s aggression in Ukraine. The reason? Moscow is India’s top arms supplier and some 70% of India’s military platforms are of Russian origin.

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