But apart from this progress on the international and European levels, the crisis has also required national governments to come up with energetic responses at home. This is because not all economies faced the onset of this crisis with the same macroeconomic imbalances or the same weaknesses in their banking systems or supervisory arrangements. From the start of the crisis, governments in some of the biggest economies were, in addition to compensating for the effects of the tightening – and even closing down – of certain funding markets, obliged to support some of their major banks with public funds. Fortunately, the more strictly regulated and supervised Spanish banking system withstood reasonably well this first wave of the crisis. But that does not mean we were immune to it. The crisis entailed an abrupt decline in world growth and gave rise to major problems on international funding markets which significantly affected the Spanish economy in general, and its banking system in particular. BIS central bankers’ speeches  1  In the long upturn prior to the crisis, the Spanish economy had built up significant imbalances, such as the external deficit, the increase in private debt and the excessive expansion of the real estate sector. In parallel, weaknesses had been incubating in the banking industry, especially in parts of the savings bank sector.
The end of the minimum exchange rate has major repercussions for the Swiss economy, and it was by no means an easy decision for the SNB. Yet this is not the first time that the Swiss economy has had to react to shocks and changes in the international environment, and the experience was often painful. The example of the watch industry shows that even a severe crisis can be overcome. Unfortunately, this example is not readily transferable to other export industries. Many companies currently find themselves compelled to seek cost reductions and efficiency gains. The economic outlook depends to a great extent on global economic developments. In its latest monetary policy assessment, the SNB is projecting that momentum in the global economy will pick up again. This should cushion the impact of the exchange rate shock somewhat, and allow Switzerland to return to positive growth in the second half of the year. While inflation has dropped well into negative territory, as things currently stand, a sustained price decline - or, indeed, a deflationary spiral - is not to be expected. Overall, the Swiss franc is currently significantly overvalued. Monetary policy is geared towards this challenging set of circumstances, and is guided by the SNB's willingness to take an active role in the foreign exchange market and apply negative interest rates. This twopronged approach is designed to ease the upward pressure on the Swiss franc. However, in the current climate there is, regrettably, no easy solution that would absorb all external disruptions.