Rugged Terrain Ahead For Switzerland

The latest crack in the concept of a unified Europe may come on Dec. 6 in Switzerland. If opinion polls are right, Swiss voters will turn down, by a 52%-to-48% majority, their government's plan to join a new 19-nation European trade zone. They're also expected to reject amendments aligning 65 key Swiss economic laws with European Community legislation.

But slamming the door on Europe could prove suicidal. Even a narrow no vote could spark an immediate run against the Swiss franc. That could touch off a rise in interest rates, as well as a sell-off by foreign investors of blue-chip Swiss shares. In the long run, it could cause Switzerland to be locked out of the European Economic Area (EEA), due to start up in mid-1993. A free-trade zone embracing 380 million consumers, it would combine the 12-nation EC and the 7-nation European Free Trade Assn. (EFTA), which includes Switzerland. To be an outcast would be a severe blow to Switzerland, which derives a hefty 60% of its $225 billion economy from international trade.

BATH TIME. Perversely, however, the country's pressing need to restructure its economy is helping the anti-Europe vote. After two years of zero economic growth, consumer confidence is at an all-time low, and unemployment is a record-high 3.5%. Real estate prices have taken a bath--plummeting by as much as 40% in Geneva since 1989. That fall, along with other loans that have soured, created severe problems at banks such as Schweizerische Volksbank and the Kantonalbank von Bern.

The malaise is boosting the fortunes of such right-wing populists as Christoph Blocher and his Swiss People's Party. "We didn't fight foreign domination for 700 years to give up our freedom now," says Blocher, a parliamentarian and businessman who runs specialty-chemical maker EMS-Chemie Holding in Zurich.

Proponents of a yes vote argue that most of what Blocher predicts will happen a lot faster if voters say no. Rents, indexed to mortgage rates, will certainly rise if interest rates do. And, some warn, unemployment could quickly double, to 7%, as companies shift activities out of Switzerland, for fear of discrimination by other nations. Already, four out of five employees of the top 15 Swiss companies work in other countries.

The exodus would involve big names. A no vote would make multinational Nestle "consider whether we still need 4,000 employees in Switzerland," says company spokesman Francois-Xavier Perroud. Already, chemical giant Ciba-Geigy has set up a biotech research facility in France, across the border from its Basel headquarters. Drug company Hoffmann-La Roche has frozen nearly $50 million of Swiss investments.

What's more, Switzerland's proud reputation as a haven of stability could be marred by political and currency turmoil. The Swiss government, in an attempt to calm the waters, is trying to hold on to its banking secrecy, farm subsidies, and tight immigration rules.

Even so, the good times that have rolled in Switzerland for the past 50 years are ending. Unless the 20% of electors who are still undecided swing the vote to a last-minute yes, Switzerland could find itself painfully isolated.

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