The Swiss Can Barely Afford Their Currency

Silvy Gillhausen, a saleswoman at the Zett Meyer watch store on Zurich's Bahnhofstrasse, senses trouble when clients from abroad pull out their phones. "Some customers come in with prices saved in their cell phones to compare them with ours," she says, standing near a display of IWC and TAG Heuer watches costing as much as 10,900 Swiss francs ($12,930). "Even when we give them 10 percent off, it's still cheaper in their home country."

The crisis in the euro zone has sent investors scurrying to the safety of the franc, driving it up 25 percent against the euro in the past two years. Almost half of the Swiss corporate executives surveyed by the central bank said in January and February that they "experienced negative effects" from the strong franc. Shops such as Zett Meyer that cater to the tourist trade feel the pain. So do exporters. "If you have loads of euro sales and lots of Swiss franc costs, you're getting killed," says Jon Cox, head of Swiss equity research at Kepler Capital Markets in Zurich. Converting euro sales into francs reduces reported results.