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Monetary policy

From the numbers shown in the recent page, the exchange rate too, reflects worsening situation, as there has been a steady rise in the numbers projected. With a GDP amounting to $499. 7 billion, purchasing power property of $332. 1 billion (Economy of Switzerland, 2009, p. 1), and current account balance of $45. 5 billion or 8. 4% of the total GDP (Economy of Switzerland, 2009, p. 1), the state of Switzerland appears to be a safe haven; yet, is not yet as good as it may seem. Even the state of the global economy has not been very promising these days.

According to the International Monetary Fund (2009), in their update of the World Economic Outlook, they indicate that “The global economy is beginning to pull out of a recession unprecedented in the post-World War II era, but stabilization is uneven and the recovery is expected to be sluggish” (p. 1). They indicate too, that the global economic growth from 2009-2010 projects a half percentage points higher than what was projected in April of this year. This would, in the end, reach 2.5 percent in the year 2010, wherein financial conditions would improve although sluggishly.

As indicated in the World Economic

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Outlook, Financial conditions have improved more than expected, owing mainly to public intervention, and recent data suggest that the rate of decline in economic activity is moderating, although to varying degrees among regions. (International Monetary Fund, 2009, p. 1) The global recession is not yet over, and recovery is expected to be slow. The following represents the global GDP growth, presenting the deep plunge of GDP evident in 2008:

• Monetary policy. Because of a vigorous economic expansion that allowed Switzerland to rise from weak economic growth in the past years, the current economic upswing may appear to be temporary, especially that manufacturing benefited largely from currency depreciation, while financial intermediation was used as a device in improving global and domestic capital market activity, which according to the Organization for Economic Cooperation and Development (2007), could be coming to an end (p.1).

The policies concerning the large inflow of immigrants into the country allowed making longer-lasting positive contribution to the aggregate supply of the demand. The challenge however, arrives in the weak competition of sectors that need more exposure to the international trade, while productivity level is not yet at its peak. Prices are also higher than those of other high income countries with lower living standards.

The challenge therefore, has been at implementing the following steps: (1) focusing on medium- and long-term sustainability that would support potential growth; (2) the strengthening of competition in product markets in order to raise productivity level and lower the prices; and (3) the nurturing of immigrants’ labor-market performance and human-capital acquisition (Organization for Economic Cooperation and Development, 2007, p. 2).

These expansion and reformation however, are not very simple as they sound, although they contain social spending that has been included in the policy priorities of Switzerland since 2002, and have GDP growth that are a total of 3. 2% in 2006 (Organization for Economic Cooperation and Development, 2007, p. 3). There are no significant inflationary pressures identified as of 2007, and while spending has been led by an external demand, consumption accelerated with a boost in the financial sector value-added because of rising stock-market indices and strong increases in the turnover.

• Switzerland’s relation to EU. Swiss politics does not reflect being convinced that joining the extremes, such as EU, would improve their state, especially in terms of the economy. It has stayed neutral for there is doubt and uncertainty reflected in the Swiss politics, hesitant and pragmatic that the action of joining the extremes would indeed bear good fruit in the end. Others call it Euroscepticism, but as Church (2003) stated, the term may be too strong for it is scepticism in the “basic, semantic sense of genuine doubt and does not mean simply limited opposition” (p. 4).

There appears to have been some involvement in the European integration, but there is also an equally strong movement in the opposition to European integration (Church, 2003, p. 4), which makes it palpable of being identified as one of those that exercises hard Euroscepticism as a whole. Thus, as Church (2003) stated, “[W]hile its outlines are often very Swiss, in essence it is quite similar to broader European trends” (p. 4). Euroscepticism in Switzerland appears to be significant, as the opposition carries the ability of blocking official policies, one that exercises a significant force in the domestic politics.

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