Britannia Radio

The bail-out for which Gordon Brown is preening himself was devised  
by Credit Suisse’s economic boffins.

That’s the point of this posting!   The Swiss have kept faith in  
their independent banking system, have been self-disciplined and  
here’s the result.

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TELEGRAPH - Comment   15.10.08
Why the Swiss economy is still as safe as – er – a Swiss bank
The Swiss are natural-born savers, says Harry de Quetteville, and  
consider banks to be emblematic pillars of society.

It’s hard not to feel humiliated when icons of national pride lose  
their lustre. That’s why governments cling on to flag-carrying  
airlines long after passengers associate them with nothing more than  
delays, frosty service and stale bread rolls.

But the Swiss take it even more personally than that. Swissair’s  
collapse in 2001 was a moment of popular despair in the nation,  
uniting people across 26 cantons and four languages in outrage.

Still for them the banks are even more pivotal. The Swiss don’t just  
think of them as institutions where they store their cash. Instead,  
they are considered pillars of society, as emblematic as mountains,  
watches and cheese, and responsible for just under 10 per cent of GDP  
to boot.
Swissair was known as the flying bank, so secure was its reputation  
before blind ambition – some would label it greed – drove it to  
destruction.

So this year, when the financial whirlwind seemed set to pull down  
the banks, the mood on the – immaculately clean and tidy - Swiss  
street looked set to turn very ugly indeed.

UBS, the Swiss financial behemoth, has so far been forced to write  
down about $43 billion after dabbling in sub-prime debt.

A Swiss friend told me: “The banks are part of our pride and there is  
certainly a sense of outrage at what is happening at UBS.”

All those traditional Swiss qualities, such as experience and  
expertise, stability and security had been cast to the wind, she added.

At the Swiss Bankers Association (SBA), which has more than 330  
member banks, there is no hiding from the wrath of the people.
“The Swiss are horrified that UBS went swimming with the Wall Street  
sharks,” said SBA’s James Nason. “They are a risk-averse people, and  
UBS has dropped a big clanger. It’s an icon that got itself in a mess.”

Switzerland’s other big financial beast, Credit Suisse, has by no  
means been immune to the crisis, though it has taken “only” an $8  
billion hit.
The disgrace of Switzerland’s most visible institutions in the eyes  
of its people seems all but complete.

The credit crunch looks set to provide a third chapter in the annals  
of Swiss self-flagellation, after Swissair and belated recognition of  
its holdings of Jewish wealth looted by the Nazis.

But when that scandal blossomed, as now, so did popular anger.
A petition was launched accusing politicians and bankers of dragging  
Switzerland’s good name through the mud.
“The standing and credibility of Switzerland as a democratic nation  
are compromised and imperilled,” it read.

In fact, it may not be time to get out the hair shirts and birch  
twigs again, because, while UBS may have erred (for which its boss  
quickly paid with his job), the Swiss people have remained true to  
their ideals.

In the words of one expert, the Swiss are “natural-born savers”.
Banks have huge deposits to draw on and are less dependent on short- 
term money markets, the freezing-up of which has brought so many to  
the brink of collapse.

Things are by no means perfect.
“It’s a difficult situation for everybody, everywhere,” said Nicolas  
Hiymoz, of the Swiss National Bank. “We are providing liquidity  
generously to Swiss banks and will continue to do so.”

But government takeovers of the kind seen in Britain are not on the  
horizon.
While countries around Europe are snapping up financial institutions,  
“the Swiss government says it doesn’t need to”, said Mr Nason.

On the contrary. Rather than folding, Credit Suisse is at the heart  
of the recovery plan that has delighted stock markets over the past  
couple of days.

Gordon Brown may be taking the credit for the scheme, but it has  
emerged that it was Credit Suisse’s economic boffins who came up with  
it in the first place, bivouacking in the corridors of the Treasury  
last week while spinning a safety net for the world’s financial  
institutions.

Despite appearances, Switzerland is certainly not immune from the  
coming recession.  Figures released last week estimate growth for  
next year down to 1·3 per cent.

But economy secretary Jean Daniel Gerber has more to be cheery about  
than most of his colleagues around Europe, and indeed the world.

He said that Swiss unemployment will remain stable at just 2·5 per  
cent, compared with 6 per cent in the United Kingdom, while exports  
will rise 3 per cent.

He asked the Swiss to renew their faith in “the principles of the  
market economy which are rooted in our constitution”.
“I am sure that these principles will survive the crisis, just as  
they have served us so well over the past 50 years,” he added. “Let’s  
not overreact.”

The faith he has called for is needed, because as we keep hearing,  
the magic ingredient in any resolution to this crisis is confidence,  
and Swiss banks are a byword for that very precious commodity.

So if the Swiss don’t trust their banks, how can anyone? And if you  
can’t trust a Swiss bank, what can you trust?