Indeed, this attitude has, in many respects, proved highly advantageous for the country. Nonetheless, it doesn’t change the fact that international competition has increased and that the Swiss are making the most of the growing number of possibilities to avail themselves of goods and services from abroad. BIS Review 69/2004  1  Of course, we can’t talk about Switzerland without also talking about the Swiss franc. The Swiss franc forms the basis for the Swiss National Bank’s monetary policy autonomy and for price stability. It also underpins the efficient Swiss capital market, which is characterised by a low interest rate level, when compared internationally, and which represents an important locational advantage for the country. The European political and economic environment - of which Switzerland is an integral part - has, however, gone through a great deal of change. It is therefore not surprising that our relationship with Europe is a topic of much discussion in my country. 2. Switzerland and the European scene  For almost six years now, Switzerland has been surrounded by the single European currency. And for six years we have been trying to make it clear to our friends abroad that Switzerland is nevertheless not an island, but is in fact deeply integrated into Europe. Approximately 20 percent of our workforce comes from EU member states. A total 60 percent of our exports go to the EU and 80 percent of our imports come from there.
It is more important to ensure that the goods markets also adjust and the inflated price level drops - this can be achieved by systematically promoting competition and by reducing state regulations. The eastward enlargement of the EU inevitably begs the question as to whether the rocky bilateral road on which Switzerland has set out will also be a fit for the challenges of the future. Accession to the EU is currently not an issue, however. Reasons for the scepticism of the Swiss people in this regard are manifold. For instance, Switzerland would have to give up the Swiss franc if it joined. This in turn would mean a higher interest rate level and an end to our autonomous monetary policy. 2  BIS Review 69/2004  It was precisely in the past three difficult years, that the possibility of conducting an independent monetary policy proved advantageous. At the beginning of 2001, the Swiss National Bank relaxed its monetary policy before the European Central Bank and, in the following months, also cut its short-term interest rates more drastically than the ECB. In March 2003, we lowered our key rate, the three-month Libor rate, to almost zero. This was in reaction to the deflationary risk in the wake of the strong appreciation of the Swiss franc. We have, in the meantime, pushed our interest rates back up slightly.