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Swiss central bank chief: 'We’re making provisions for a euro break-up'

Thomas Jordan says he’s not expecting the euro to collapse, but that Switzerland is getting ready, just in case…

Image: Markus Schreiber/AP

SWITZERLAND DOES NOT foresee a break-up of the eurozone – but is nonetheless drawing up an action plan in the event of its collapse, the country’s central bank chief said today.

Thomas Jordan, who became chairman of the Swiss National Bank last month, told the SonntagsZeitung newspaper that a working group was discussing measures to combat any strengthening of the safe haven Swiss currency.

The bank intervened in September to stem the rise of the Swiss franc which had soared as investors sought a secure place for their cash, hurting Swiss exports and the tourism industry.

Jordan said the eurozone crisis had worsened in recent weeks and he foresees bumpy times ahead.

“The working group is focussing mainly on instruments to combat a strengthening of the franc,” said Jordan. ”We have to be prepared for the scenario of a currency union collapse, although I don’t think that will happen.

“One measure would be capital controls, that’s to say controls directly influencing the flood of capital into Switzerland,” he said, declining to give further details.

Jordan said the bank would defend its exchange rate floor against the euro of 1.20 francs. The franc closed at 1.2014 on Friday.

The SNB has consistently said it will enforce the minimum rate and is prepared to buy unlimited quantities of foreign currencies if necessary.

The cap was introduced after the franc posted a sharp gain in value last year, going from 1.23 to the euro at the beginning of July to less than 1.05 a month later.

“Maintaining the minimum price is the monetary policy that we will continue with determination for the foreseeable future,” Jordan said.

The euro had extended its slide against the dollar on Friday, dipping below $1.25, under pressure from uncertainty over the future of Greece in the eurozone, and the risk of contagion from its debt crisis.

Jordan succeeded former bank head Philipp Hildebrand who quit in January over a controversial dollar trade by his wife.

- © AFP, 2012

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