Potential drawbacks of the new framework on a small open economy  But would the introduction of the euro be only good news for the Swiss economy? A revolution is always associated with risks and uncertainties, thus it should not surprise you that we were concerned about potential negative developments. In the mid-1990s, as the European monetary construction was under way, we tried to imagine the potential negative effects of the euro introduction on the Swiss economy. Our goal was to be prepared to face difficult situations. This is what central bankers are paid for, after all. We had identified three main challenges: (a)  First, the major risk was that the introduction of a European currency would destabilize the Swiss franc. In the past, the Swiss franc, along with the German mark, played the role of a safe haven currency whenever monetary crises occurred. With the disappearance of the German currency, the Swiss franc would find itself first in line of fire in case of a dollar crisis, for example, or even worse, in case of doubts about the stability of the European currency. (b)  Second, we risked seeing the euro being increasingly used as a means of payment in Switzerland. As the common currency was about to become the main unit of account for our exports, we feared that domestic firms might adopt the euro as well, so as tominimize exchange rate risks. Some were even imagining wages being paid in euros.
The notion that the welfare of a country boils down to the short-run profits of a few foreign exchange dealers is narrow minded. The reality offers a completely different picture. Switzerland has always suffered from external monetary turbulences and always wished for a stable monetary order. For example, the various crises of the European Monetary System in the 1990s, with a dramatic drop of the Italian lira, have led to the complete removal of the traditional textile industry from our economic geography. Such structural adjustment could arguably have occurred anyway, but the decisive factor at the time was of monetary origin. The purpose of the creation of the common currency was not only to concentrate the monetary power in the hands of the European Central Bank, but also to promote the conditions for transparency and competitiveness that would in turn foster trade, investment and growth in the internal European market. Price comparisons are indeed easier today, andtrade and liquidity management are much simplified, although it is still too early to numerically assess the impact of these effects on growth. Simplifying trade and investments in the European market not only benefits members of the European monetary zone, but it also helps anyone interested in being active in the European market. Switzerland, with its high degree of integration in the euro zone, reaps large benefits from this stable situation. Thus, it is clear that on those aspects, the introduction of the euro was very good news for the Swiss economy. 2.