Swiss Franc Revaluation: the Pizza Dilemma

An interesting side effect on the recent swings in the Swiss currency was the pizza dilemma. When Switzerland decided to remove the cap on the franc versus the Euro the Swiss franc rose about forty percent and then slowly fell to a range about twenty percent above the previous value. This has been an issue for those trading the Swiss franc but also for pizza businesses in Switzerland who were being undercut in price by deliveries from German. According to the Independent the currency situation caused the Swiss to block pizza deliveries from Germany.

Switzerland’s decision to lift the cap on the franc’s value against the euro has had unexpected consequences – in the form of intercepted pizza deliveries.

Swiss people looking for a bargain have been dialing up restaurants across the border in Germany, but now the authorities have had enough, according to the Wall Street Journal.

Uli Burchardt, the mayor of Constance, which borders Switzerland to the northeast, told the publication that German vans have been stopped by Swiss customs officials after it was discovered they had been delivering up to 60 pizzas at a time.

The move by the Swiss bank to let the franc float was not a popular one with many Swiss businesses who are finding themselves priced out of many markets. This may be part of why the franc has fallen back toward a more acceptable trading range.

What Else Besides the Pizza Dilemma?

The Swiss franc revaluation bankrupted many currency traders and made a few millionaires too. The Pizza dilemma is only a small facet of the problem that the Swiss have in anticipation of a cheaper Euro. The USA currently has the healthiest economy in the world in large part due to the quantitative easing campaign carried out by the US Federal Reserve under chairman Bernanke. The Fed opened the flood gates and supported credit and liquidity at a critical time. The EU went the austerity route and is paying the price in terms of flirting with deflation and worrying about an exit of Greece, Italy, Spain and others from the EU. As the EU moves to more of an easy money approach mimicking the quantitative easing program in the USA the prospect is very strong for a weaker Euro. Since the Swiss were buying Euros and selling francs to keep the franc from getting too expensive it simply got to be too expensive for a smaller nation to be supporting the currency of the second largest economy in the world, the European Union. A major problem for the Swiss in this regard is that they have the ultimate safe haven currency. Just the other day the franc was raised and then fell back on the Greek debt deal.

The Swiss franc shed over 1 percent against the dollar on Monday, dropping towards five-week lows as some of the Greece-related safety flows waned after a conditional loan extension for the bailed-out country was reached late last week.

It seems that the more problems there are in the world the more the Swiss are required to manipulate their currency.