26/01/2015
The rise of the Swiss currency is causing a headache for borrowers
European concerns about the survival of the franc against the euro
HansJoergSchellingAustria's finance ministeryesterday said "that Switzerlandwill not allowits currencyto remainat their currenthigh levelsagainst the euroin the long term,because itwill causesevere damage tothe Swiss economy."
SNBhasshockedfinancial marketsthis monthwhen hecanceled themaximumof the Swissfrancagainst the euro, which led tothe rise ofthe francby about40percent against thesingle European currency.
"CentralSwiss"surprisedmarketsby announcingabandonthe minimumexchange ratewhich has ledto a rise inthe price ofthe francagainst the European currencyanddeterioratedmajorSwiss companieslistedshares,whichmay sufferdifficultiesprices oftheir exports.
Andsees "the centralSwiss"it was not possibleto get out ofthe minimumrate Francexchangein a gradual manner, it was nota surprisetothe marketactionto be effective.
He expressedseveralSwiss companiesheadsforsurpriseand lack ofunderstanding ofthe decision, whichsparkedpanicinthe Swiss stock exchange,even if thecommentsin the Swisspress,included arequest forresignation, "SNB"ChairmanThomasJordan, whowas severelycriticizedin the mediaand the Swissinternational economiccommunity.
Andusedin thecountriesof Central and EasternEuropeto borrowin Swiss francsdue to the lowinterestof those loans,butthe sharp riseof the Swisscurrencyis causinga headachefor borrowersin many countriesfrom Poland toCroatia.
AndAustriarichlookthat preventeda lotofforeign currency loansin2008less affected bythe Swissmove,butthe abolition ofthe rooffrancmovedagainst the dollarmeans highercost ofdebtservice for about151thousand familiesgotloans worth29 billioneuros (32.5billion dollars)denominatedin Swiss francs.
The newspaper "Ostric"quotedSchellingsaid,"It isfor theAustrianswhopossessloansfrancsit means that thecost of debtwill increasethemfrom 20 to25 per cent,I do not thinkthat thefrancwill remainat thesehigh levelsover the long termbecauseSwitzerlandcannot afford totherefore,itwill increasethe cost ofexports anddecliningtourism. "
AndOofaqa"Reuters",Schellingdid notmention anything abouthowto rein inSwitzerlandfranc,the Swiss currencyamounted to0.987francsagainst the euroat the end oftrading lastFriday aftershe was1.20francsbeforethe decision"central."
ZoranMilanovicwasthe Prime Minister ofCroatiaannounced thathis country had decidedto installthe localcurrencyexchange rate ofthe kunaagainst the Swiss francfor a temporary periodin order to protectthousands ofwinningthe SwisscurrencyloansCroatianfamilies.
Milanovicsaid, "Thegovernment and thecentral bank governoragreedon a lawto install thekunaexchange rateat6.39francsperKunaforconsumerloansfor a period ofoneyear, and thepotential cost ofthis procedurewill be borne bythe banks."
He pointed outthat itcan convertthe Swiss francloanstokunaduring the currentyear, butto achieve thiswe have to workwith the Central Bankof Croatia, becauseit comeswith tens of thousandsoffamilies whocannot sleepnowbecause of the fearof the repercussions ofthe changein exchange rates.
According to estimates, about250thousandCroatianfamilygotabout 60thousandlong-termloanin Swiss francswith a total valueof up to2.2 billionKuna($ 3.35billion).
It is noteworthy thatknownunder the name"Swissloans"loanswere scatteredin Croatiaandmany of thecountries of Eastern Europewhenthe euro wasstrong againstthe Swiss currency, butthe Swiss central bank's recent decisionto abandonthe minimumrateof the euro againstthe francled toa significant increasein the Swisscurrency,which will leadto an increase inborrowers'obligationsin Croatiaatthe expense ofthe currencydifference.
