The Surging Franc: Swiss Fear the End of Economic Paradise

Aug. 28, 2011— -- By seeking safety in the Swiss franc, global investors have caused its value to skyrocket. But the currency's rapid appreciation hassignificantly hurt exports and tourism -- and given rise to serious worries about the future.

The global financial crisis has finally made its way to this small Swiss valley. When Hans Stadelmann talks about currency speculators, it seems like two worlds are colliding.

There is Stradelmann, the 44-year-old cheese maker standing in his small factory, which smells of freshly cut Appenzeller cheese. Five men are working at the boilers, making the most popular Swiss cheese in Germany according to a traditional recipe handed down through the centuries.

And then there are the international financial markets, that abstract global entity whose actors have decided that the Swiss franc is a safe investment and, in doing so, have pushed the currency's value to record levels against the dollar and the euro. A year back, one euro was worth 1.35 francs. Two weeks ago, the value was 1-to-1.

This presents a problem for Stadelmann. About 40 percent of his products are exported, most of them to EU countries. In order to keep his earnings level in francs, he's being forced to charge higher prices in euros -- and not all of his customers are willing to pay them.

"I'm already selling less, and I'm afraid it's going to get much worse," Stadelmann says.

And it's not just his company he's worried about. "I get my milk from 50 small family farmers," he says. "If I close up shop, I'd be destroying the livelihoods of 50 families."

Swiss Buying Imported Cheese

Stadelmann is powerless against the financial markets. He knows it, and it only makes him worry more. Investors across the world are finding safe haven in the Swiss franc, and the country's export industry is paying the price. Exports from the Alpine nation tumbled by about four billion francs (€3.5 billion or $5 billion) in June, and exports to the EU, the country's most important trading partner, were down almost 15 percent.