An overheated Swiss franc could have "dramatic" consequences for the country's economy, a top official says, as the country's business and tourism sectors braced for tumbling sales.
The franc has jumped around 15 per cent against the euro since the Swiss central bank stunned markets on Thursday with its bombshell decision to abandon the minimum rate of 1.20 francs against the European common currency.
The Swiss National Bank had since September 2011 been defending the exchange rate floor in a bid to protect the country's vital export industry, including by buying massive quantities of foreign currencies.
If the franc remains at its current level, trading at around parity with the euro, "the consequences will be dramatic," Serge Gaillard, head of the Swiss Federal Finance Administration, told the Zentralschweiz am Sonntag weekly.
He warned that the economic outlook for the wealthy nation would "radically" worsen, although he said it did not believe it would slide into recession.
The high level of the franc is seen as a significant threat to Switzerland's export-dependent economy, as prices for Swiss goods abroad suddenly jumped 20 per cent overnight.
The central bank has faced a barrage of criticism, with Swiss exporters and tourism companies accusing it of sinking their business.
Thursday's move has also been criticised abroad, where the soaring franc has wreaked havoc on markets, engulfed eastern European neighbours whose mortgage debt is denominated in the franc, and bankrupted at least two foreign exchange brokers.
Central bank chief Thomas Jordan has adamantly defended the move, insisting the bank's efforts to hold down the Swiss currency, including through buying up massive amounts of foreign currency, were no longer justified.
He has received backing from Swiss Finance Minister Eveline Widmer-Schlumpf.
"I do not question the move," she told several Swiss media in an interview published Sunday, voicing confidence that "Swiss businesses will handle the situation."
She said it was "too early" to envisage business tax cuts to counter the effect of the strong currency, but said she might reconsider further down the line.
Swiss businesses were meanwhile bracing to see exports plunge and shoppers at home flood across to neighbouring eurozone countries for cheaper goods.
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