Swiss decision to look after their own interests could promote protectionism

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Switzerland has been warned that their decision to cap their currency against the euro could encourage other nations to follow their lead and ultimately boost protectionism.

The Organisation for Economic Co-operation and Development Secretary General Angel Gurria expressed his “concern about the broader context” of the Swiss decision.

Gurria’s chief worry is that within the climate of fear that many countries within Europe are currently operating, such an action could have a domino effect and lead others to protect their own interests. This is something which could be disastrous for an already fractured Euro-zone.

This announcement follows news that the Swiss central bank will maintain its cap on the franc at 1.20 per euro, making the euro sink 0.82% against the Swiss franc to €1.227.

Jonathan Loynes, Chief European Economist at Capital Economics, suggested that the Swiss National Bank (SNB) would enforce the cap with the ‘utmost determination’.

“Nonetheless, a continuation or escalation of the eurozone crisis (as we expect) could see renewed upward pressure on the franc, forcing the SNB to follow through on its pledges of further action,” added Loynes.

Switzerland’s Economics Minister Johann Schneider-Ammann recently admitted at a press briefing that the Government was largely in the dark over what the future holds for the country.

Transfer money to Switzerland

If you are looking to invest in Switzerland, think carefully about how you will be transferring money to Switzerland. Foreign currency exchange rates quoted by banks are usually worse than the exchange rates available through specialist currency dealers, which means they are probably not the best way to send money abroad.

So if you are sending money to Switzerland, which you will inevitably have to do if you are looking to make a property investment, be sure to compare the market before you buy your overseas currency.

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