Cold North Wind

The snow is already turning to slush but is it a sign of the long winter that is ahead of us? A recession. The prospect of job cuts. And a Christmas that could potentially be so parsimonious that it will make Scrooge seem like Santa Claus himself.

But it is not just the weather that has turned cold. Something in the political climate did the same thing.

For many years, Switzerland has had a somewhat complex relationship with its northern most neighbour: the big canton to the north – that would be Germany – has been a source of many things that have made Switzerland better (namely qualified company managers, fast cars, discount supermarkets and, allegedly, the large cash deposits). However, the Swiss seem generally ambivalent towards their teutonic cousins: in what was to my mind one of the most shocking examples of xenophobia that Zurich has seen recently, a German radio DJ was effectively hounded out of her job last year by a groundswell of opposition to her non-Swiss pronunciation.

Now, Germany’s purposefully uncharismatic finance minister Peer Steinbrueck has raised hackles with his suggestion that Switzerland be put on a blacklist of tax havens, with many arguing that this is a thinly disguised move to knock the stuffing out of Switzerland’s banking industry. It is an age-old battle and resurrecting it again is a sure fire way of testing the Swiss’s patience with their neighbours.

In Germany, such rhetoric – particularly from someone as bluntly spoken as Steinbrueck – is part of the rough and tumble of politics; a game that the media willingly plays along with until some other equally incendiary statement is made. But in Switzerland, where one’s word is taken at face value, such utterances normally carry far more weight and are seen as being a likely indicator of future policy. Perhaps they have a point: after all it was Steinbrueck who kicked off the massive tax evasion probe earlier this year that threatened to spill over from Liechtenstein into Switzerland.

The Swiss People’s Party, the nation’s most popular political grouping, appears to have seized this resentment, however, as the motivation for their latest policy position: their leader Toni Brunner surprised Switzerland earlier this week by saying that it will fight the continuation and extension of a labour treaty with the European Union under which most of Zurich’s German population, and me incidnetly, have got permits to work here.

Are the SVP redirecting the anger felt by voters over the attack on bank secrecy towards another target? Are they rising to Steinbrueck’s bait? Or are they positioning themselves for their next Swiss elections by drumming up some popular support.

A referendum on the free movement of people accord and extending it to Bulgaria and Romania will be held on February 8. Three of the four parties in the government, as well as the business lobby, are recommending they accept the deal.

It appears then that the move is an attempt to show that two can play at that game. It remains to be seen whether the vote will trigger another spate of icy temperatures and frosty weather from Switzerland’s northerly neighbour.

An Era's End

House prices and credit cards. Stock market investments and tracker funds. Manolo Blahniks and Cosmopolitans. In a couple of decades we will be looking back on the past eight years and wondering what got into us. How did a seemingly rational western world become so obsessed with the creation and retention of material wealth that the defining TV programme of the era was based solely on the concept of shopping and sex? I refer of course to Sex and the City, a show which now seems so hilariously outdated that a movie released earlier this year already looks anachronistic.

Another indication came this week that an era has ended: the news that Madonna, the Ur-Material Girl, and Guy Ritchie are to divorce. After having fed our desire for celebrity gossip for so long, the media hyped star couple finally called it quits, after -- guess -- eight years. So what's going on? Is our post-millenium hangover finally kicking in, eight years after the event? The Credit Crisis too has its roots in that new millenium fever that convinced us we were going to be richer than ever before and that it would be easier than ever before to get rich. Eight years on from the start of the boom, the bubble has finally burst.

The credit crisis came home to Switzerland this week too. A secret plan to boost UBS's coffers with government money was, well, kept secret until the very last minute and announced together with a package of other measures that will ensure that Switzerland continues to be known for its banking prowess rather than as being a country that used to be known for its banking prowess. The result is a partial privatisation of UBS that has left the bank's employees feeling rather bemused: we are no better than subsidized egg farmers, one of them told the NZZ newspaper. The difference being, I think, that you can't make an omelette out of collateralised debt obligations.

So, without getting too maudlin, it's all starting to feel rather fin de siecle around here. After spending eight years trying to keep up with the Ritchies by spending big on our credit cards, it seems we might be entering an entirely new era of austerity and prudence. Now is the time to be thinking about downsizing, cutting back, tightening the belt and all those other cliches that are used to describe the grim reality of a world in which a daily cup of Starbuck;s Cappuccino suddenly seems excessive and wasteful and a 100 gram bag of Marroni appears to be a healthy, nutritious and above all cheap alternative to starvation. In East Germany, apparently, sales of Marx's communist treatise "Das Kapital" are going through the roof. Now there's a sign.

Crisis? What crisis?

Anyone looking for a true gauge of investor sentiment, should look no further than a little corner of the Bahnhofstrasse. There, close to the HB, stand the stock market pundits of Switzerland. Forget the arm-waving doom-mongering of CNBC’s Jim Cramer. The plumily-delivered wisdom of Britain’s David Buik. The people who really know where its at are the stockwatchers of Bahnhofstrasse – and they are looking pretty gloomy.

Just next to shops selling jewels and furcoats, there is a UBS shop window with electronic display boards showing stock prices. While the shop windows have shone green for the past 5 years, indicating the rising prices of much of the world’s stocks, they have recently been glowing red – as stock markets around the world take a tumble. The Bahnhofstrasse stockwatchers gather with their migros and coop shopping bags, around the time of the US market open, and watch with morbid fascination as the western world’s wealth diminishes.

On Monday, the Swiss Market Index (SMI) had its worst day since September 11, with stocks tumbling. Later in the week, the Swiss National Bank joined the other central banks of the world in cutting interest rates by 50 basis points in an effort to give the endebted a break. The Swiss government also joined other European banks in reinforcing its commitment to guaranteeing Swiss savings up to the sum of 30,000 Swiss francs per person.

So far, however, and bear in mind that this is written and recorded hours and days before you get to hear it, there has not been any major collapses, bankruptcies or otherwise among the banks of Switzerland. Unlike Iceland, the week has been a relatively stable one for Switzerland’s financial institutions. While Europe goes to hell in a handcart, Switzerland appears to be sitting pretty. Ask someone on the street if they are bothered about the financial crisis and their answer will be ‘no’.

And why is that? Because unlike the UK, whose citizens have borrowed more than the value of the entire country’s economic output for a year, the Swiss don’t do debt. When did you last see someone buy a round of drinks on a credit card in Zurich? Never. They don’t own their own homes. They don’t buy and flip property. They don’t max out five credit cards and consolidate their debt into one easy repayment loan. Ok, as a result their economy might not show the kinds of amazing boom that Iceland or Ireland have shown in recent years, but it don’t shown the same levels of bust either.

What’s more, and I can’t confirm this is true but we can assume it is, the country is sitting on a huge pile of gold, the only asset that is appreciating. According to the Swiss National Bank, the country holds around 1,000 tonnes of Gold despite having sold some recently. One tonne of gold is worth around 30 million dollars so that would make Switzerland’s stash worth around 30 billion dollars or 30 thousand million to be precise. That is 30 thousand million dollars worth of hard assets. Quite reassuring.

And finally, another reason is that the Swiss are scrupulously honest. In the USA, when a banker loses billions or thousands of millions of other people’s money, the investors get none and the government gives them more. In Switzerland, it works differently. A news story caught my eye. A businessman leaves a Zurich carpark this week having mistakenly left his briefcase on the roof of his car. As he speeds off it falls to the ground and remains there for an hour before a woman picks it up. On opening it she finds his ID documents and 11,000 francs. To the amazement of the man and the police, she hands the money and the briefcase in. She is rewarded for her efforts with 1100 francs. Now if only Lehman Brothers would do the same.

Red Carpet Treatment

It is a dangerous time to be a banker: if the pressures of the biggest global crisis since the great depression of 1929 are not enough to drive you over the edge or give you a heart attack then your investors could well be plotting your downfall, cowering in the alley way behind your luxury penthouse waiting to clobber you with a bag of worthless collateralised debt obligations as soon as you step out of your Maserati.

No matter how bad it gets though, life as a Swiss banker still remains quite sheltered when compared to that of a German peer in the 1970s. As if being dogged by two oil crises were not enough, German bankers and industrialists and politicians were stalked by the stylishly dressed, BMW-driving nutters of the Baader Meinhof gang ? a group whose members were to terrorism what Posh and Becks are to football, only expect the terrorists gave fewer interviews to hello magazine.

The closest that Switzerland has ever come to organised terrorism (and I am excluding here the Jura separatist movement for reasons I shall explains) was the screening of a new German film about Baader Meinhof at the Zurich Film Festival earlier this week. Opening the festival, this film is a portrayal of the apparently slightly unhinged Andreas Baader and his antics in Germany in the 1970s leading up to his death in 1977.

Lending a touch of retro chic to the festival, it starred Germany's Leo Dicaprio Moritz Bleibtreu and was generally well received, although the apparently uncondemning portrayal of the terrorists attracted criticism from some quarters. The Zurich Film Festival certainly knows how to make waves, however. In just its fourth year, it is already building a profile both in Switzerland and beyond.

Part of its success is due to Zurich's readiness to embrace the movie: it has the highest number of cinemas per head of population than any other city. While I would argue that this has more to do with the fact that Zurich's older art-house cinemas have been kept alive intentionally, than any particularly keen cinemagoing streak in the Zurich mentality it is nonetheless an impressive feat and one that should be applauded.

It is also bringing an interesting dose of stariness to Zurich's otherwise deeply Zwinglian shores: the red carpet was rolled out for tow heroes of Hollywood this week, namely Messrs. Stallone and Fonda. Now, politically, it would seem that you couldn't have picked too more opposed Californian residents to come visit Switzerland: the Easy Riding Fonda being a vociferous Democrat and Mr. Stallone - well actually he is much bigger than me so I am not going to guess his political persuasions.