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The financial crisis of 2008 and the Swiss ‘miracle’

The financial crisis of 2008 and the Swiss ‘miracle’

The collapse of Lehman Brothers ten years ago triggered one of the biggest financial and economic crisis in a century. Switzerland did not escape unscathed but fared better than other countries, without amassing huge debt.

On September 15, 2008, the fourth largest US investment bank filed for bankrupcy over the crisis in the subprime mortgage market. The government refused to bail out the insolvent institution, creating a collapse in confidence that froze credit markets and decimated the banking sector. From the United States, the financial crisis spread to other countries, soon turning into a global economic crisis that raised the spectre of another Great Depression.

Switzerland was also affected but not as badly as initially feared.

Several reasons rendered Switzerland particularly vulnerable over the course of the crisis. Its top two banks, UBS and Credit Suisse, were among the most exposed foreign institutions in the subprime bubble. Switzerland was more dependent than other countries on the banking sector, which still accounts for more than 10% of gross domestic product (GDP). In 2008, the Swiss economy was barely recovering from a period of economic growth defined as anaemic. The crisis hit the US and the EU, Switzerland’s main economic partners, the hardest.

Making matters worse, the fall in the dollar and the outbreak of the crisis in the eurozone again pushed the Swiss franc upwards, causing prices for export goods to rise sharply. In 2011, the Swiss National Bank (SNB) was thus forced to introduce a minimum exchange rate threshold of CHF 1.2 for one euro, which was abandoned in 2015. This, together with the SNB’s further interventions in the foreign exchange and interest rate markets, made it possible to partially contain the upsurge in the Swiss franc.