Jean-Pierre Roth: Swiss franc and euro - two sister currencies? Speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank, at the Swiss-Brazilian Chamber of Commerce, Sao Paulo, 19 November 2004. *  *  *  It is a great pleasure for me to talk to you today about the Swiss franc and the euro after six years of monetary integration in Europe. Looking at the map, you might wonder whether Switzerland, a small spot in the middle of Euroland could still follow an autonomous monetary policy. What are the consequences of the introduction of the euro on the Swiss franc and on the effectiveness of Swiss monetary policy? And what are the effects of this new international monetary order on countries outside the dollar-euro block more generally? I will try to provide some insights on these questions today. First, I will present the change in our monetary framework due to the creation of the euro. Then I will enumerate the main fears that we originally had regarding the effects of that transformation, and our experience with the new environment. Finally, I will share some lessons on the influence of the introduction of the euro for the international monetary system and for the autonomy of Switzerland’s monetary policy. 1. A new international framework  January 1, 1999, constituted a true revolution for Europe. Many observers argue that the introduction of the euro represents the major postwar stage in European integration. They are right.
We thus kept our monetary autonomy intact. 4. Conclusion  Let me conclude by first emphasizing the positive global influence that the euro has had since its introduction in 1999. Not only does the common currency contribute to the integration of the European market, but the appearance of a counter-weight to the US dollar has helped stabilize the international monetary order. Exchange rates of third currencies can thus evolve closer to their economic fundamentals, and the impact of exchange rate fluctuations on capital flows and foreign trade are dampened. Developments in the financial markets over the past 5 years have shown us that although highly integrated in international markets and despite the emergence of a bipolar currency environment, the SNB can keep its monetary autonomy and follow an independent monetary policy that is adapted to the needs of the Swiss economy. As a result of our independent and successful policy, together with the global character of the Swiss economy, the Swiss franc has retained its own profile. However, as we know, this particular profile is not without risks. Extreme volatility of exchange rates cannot be excluded, but our experience with the euro/Swiss franc exchange rate has shown that currency markets are not as irrational as some people believe. With a relatively stable exchange market, low inflation and lower interest rates than the rest of Europe, the monetary situation of Switzerland is relatively comfortable. Ladies and Gentlemen, The title of my speech was “Swiss franc and the euro: two sister currencies?” I can now answer the question.