The date has been set and the first posters have already been hung. Swiss citizens will elect their new parliament on Oct. 18, 2015. But the country’s future was already decided this month.
It was not decided by the more than five million eligible voters, with their gray lists of candidates for the Federal Council and Council of States, but rather by three men in wood-paneled offices on Bürkliplatz in Zürich.
Switzerland’s future was decided by their rows of figures, their economic expertise and a dry communiqué containing an unambiguous sentence: “The Swiss National Bank is repealing the minimum rate of 1.20 francs per euro.”
The announcement was more than just a bombshell of monetary policy that sent shock waves around the globe. The central bank’s decision is likely to drastically change the Swiss economy in the next few years.
The move, dubbed “Francogeddon,” raises an important question for the Swiss: Who is actually in charge in their country? The Federal Council, the Federal Assembly, the Swiss people?
Or is it actually a triumvirate of men, led by Thomas Jakob Ulrich Jordan, born in 1964, holder of a doctorate in economics and the president of the Swiss National Bank (SNB)? These men were chosen by the Federal Council after being nominated by the Bank Council, a panel of business professors, trade union officials, Federal Council members and the heads of industry associations.
The legal situation is clear. The National Bank is supposed to make the most rational decisions possible, while lawmakers from the Federal Council and the Federal Assembly, not to mention the Swiss people, are to be given no say whatsoever. And that’s a good thing. Economic history shows that central banks that do the bidding of lawmakers become money presses for free-spending administrations. The fear of voter anger over a sputtering economy, which the government seeks to defuse with a straw fire of cheap credit – this human risk is too great, even in Switzerland, considered a model of fiscal policy.
The fact that he is not held politically accountable for his decisions, and rightfully so, does not absolve the SNB president of his responsibility to the people.
It was Thomas Jordan who said in 2007: “A transparent monetary policy does not completely rule out occasional surprises, as long as they occur with relative infrequency and are comprehensible by the public.”
The Jan. 15 decision, however, is incomprehensible, even by experts. It’s been almost a week since the news was announced, and they are still speculating over the motives.
Was it really the fact that the monetary policies of Europe and the United States are drifting apart that led Mr. Jordan to take this step? Or was the SNB no longer able or willing to keep buying up billions of euros to soften the price of the Swiss franc? Was it worried about the deluge of money that Mario Draghi, Mr. Euro, announced last week?
The Swiss finance minister, Eveline Widmer-Schlumpf, was notified of the SNB decision only a few hours before it was made public, while the economy minister, Johann Schneider-Amman, received only 30 minutes' notice.
So, Mr. Jordan, explain yourself.
And not just with vague responses, as you did in recent newspaper interviews. What we need now are concrete answers to concrete questions.
No head of a department, no representative of a professional association, no member of the National Council and no voter can achieve as much by decree in Switzerland as the SNB president. The Swiss finance minister, Eveline Widmer-Schlumpf, was notified of the SNB decision only a few hours before it was made public, while the economy minister, Johann Schneider-Amman, received only 30 minutes’ notice. This is despite the fact that the law governing the SNB stipulates: “The Federal Council and the National Bank shall inform one another of their intentions prior to making critical decisions relating to economic and monetary policy.”
A secret memorandum regulates the collaboration between the SNB and the Federal Department of Finance. This explains why senior government officials were so baffled and speechless when they spoke to the media. Someone else was calling the shots on that historic Thursday, Jan. 15th –Thomas Jordan, the economist prince.
No domestic policy decision of the last few decades has had such direct consequences. The UBS bailout by emergency law was practically child’s play compared to the elimination of the franc’s cap against the euro. Under an emergency law adopted by the Federal Council in October 2008, the SNB and the Swiss government were to buy up $60 billion in bad loans from the major bank. This led to fierce political debates, and a special session was convened. And the referendum of Feb. 9, 2014, when the Swiss jeopardized their bilateral relations with Europe, was practically a footnote to the latest events.
The events of Jan. 15 showed that central bankers are now the most important economic policymakers. This is not just true of the European Union, where European Central Bank President Mario Draghi took a legally questionable step when he announced the ECB’s acquisition of the sovereign debt of crisis-ridden Southern European countries. It’s also true of Switzerland.
Was the introduction – and now the elimination – of the franc’s cap against the euro a further step toward a European normalization of the country? Merely the fact that this impression is being conveyed could be devastating, especially in Switzerland, with its direct democracy, that could also access the SNB.
Now, in an election year, Swiss citizens are realizing how little their votes are worth compared to strokes of the pen by a trio of economists hardly anyone knows.
It’s been four years since the Swiss People’s Party (SVP) sounded the death knell for the Swiss National Bank. At the time, it submitted a motion demanding political supervision of the SNB “for currency purchases.” The party, headed by Christoph Blocher, had set its sights on Philipp Hildebrand, the president of the SNB at the time and the most colorful central banker Switzerland had ever had. Mr. Hildebrand stumbled over allegations of insider trading against his wife and the furor subsequently unleashed by the SVP. In fact, there was a method to the systematic attacks on the SNB, whose independence was being called into question.
SVP politicians later launched another attack on the SNB with their gold initiative, which was intended to force the SNB to hold at least 20 percent of its currency reserves in gold in Switzerland. But the initiative was rejected in a referendum last November. Nevertheless, a few utopians are already gathering signatures for another radical referendum. The aim of the so-called sovereign money initiative is to permit only the SNB to create new money, rather than individual banks.
In short, the central bank was already increasingly sliding into the field of politics before Jan. 15. The fundamental confidence of the Swiss in their monetary watchdogs is up for debate. Like the rest of Europe, our country also suffers from a problem with its elites. And now, in an election year, Swiss citizens are realizing how little their votes are worth compared to strokes of the pen by a trio of economists hardly anyone knows.
It is all the more urgent that Mr. Jordan offers some explanation as to why the national bank is eliminating the franc’s cap against the euro at this particular time. The fact that he is not held politically accountable for his decisions, and rightfully so, does not absolve the SNB president of his responsibility to the people.
This article first appeared in Die Zeit. Matthias Daum is the head of the paper’s Zurich bureau. To contact the author: email@example.com