Question

What were the pros and cons of Switzerland pegging to the euro, and who did it benefit?

Answer 1

It has different pros and cons of the Switzerland pegging its currency to the Euro. The first pro is to provide stability to the exchange rate between Swiss Franc and Euro. Since, Switzerland is the member of the Euro, and has shown its commitment to the Euro and EU, then it was important to take the step and bring stability to help traders. The second pro is to make Switzerland as an attractive place to pursue export oriented business activities. With a peg between these two currencies, exporters became benefited and got an advantage in the international market. The third pro is the building of financial stability between lenders and borrowers without giving undue advantage to any party.

Though there are cons also. It inhibited the independence of central bank of Switzerland and people holding Swiss Frac could get the advantage of appreciating Swiss Franc. The second con is the fluctuation in value of Swiss Franc with changes in value of the Euro.

Due to the pegging, it is the exporters & export oriented businesses in Switzerland who benefited from it. In international market, they became more competitive.