Switzerland considers pegging to the euro

With the world's main currencies in crisis, the historically stable Swiss Franc has exploded in value over the past year. This has had a disastrous effect on the Swiss economy, as its exports and tourism industries struggle under the effects of a drastically overvalued franc.

This was in clear evidence earlier this month when I took a trip on the Glacier Express train across the Swiss Alps with my father. Ordinarily this scenic tourist train would be packed in August, having sold out months in advanced. But our train was nearly empty. When we finished our journey in Zermatt, home of the Matterhorn, the city was dead quiet. It looked like three-quarters of the rooms in our hotel were vacant.

It makes sense. After all, who can afford a vacation in Switzerland these days? It was already an incredibly expensive country, and the current exchange rate close to one euro to one franc (three years ago it was 60 cents to one franc) makes it unaffordable for most tourists from France, Germany and Italy. When my father moved from the US to Zurich in 2006 the exchange rate was 80 US cents to one franc. Today it's $1.37 to one franc. Given that a value meal at McDonalds costs 15 francs ($20), it's a difficult place to be if you don't make a Swiss salary.

Is America too old to function?

One of the most frequent clichés I hear as an American living in Europe is that the US is a 'new country' while nations on this continent are 'old'. It is usually used to explain away American peculiarities, as if the US is a naïve child who just hasn't had the time to attain the wisdom of the more mature, centuries-old European states.

But however often it's repeated, this common wisdom is patently false. As a country, the United States is older than the vast majority of European states. At the time of the US declaration of independence in 1776, the states of Belgium, Norway, Germany, Italy, Finland, Romania, Slovakia, Greece and Latvia had all never existed yet in any form. And that's just to name a few. The fact is that European nations are actually quite young - and that is what makes them more agile in the face of modern problems than the United States.

Even the European countries which did exist in some form in 1776 - such as Spain, Portugal, the Netherlands and France - today barely resemble what they were at that time. The Kingdoms of France and Portugal in 1776 are now republics with completely different systems of government. And going in the other direction, the Dutch Republic in 1776 - a loose confederation of provinces - bears little resemblance to today's Kingdom of the Netherlands.

The US has had the same governing structure since 1789, the date that marks the founding of the current American republic with the adoption of the US constitution (which replaced the previous Articles of Confederation in place since 1776). The US has used the same government system since then. Contrast this with France - whose current republic has only been in place since 1958 – or the Federal Republic of Germany, which dates from 1949. Other founding dates of current European government systems include: Italy – 1947, Spain – 1978 and Poland – 1997.

In fact the only European governments that could legitimately claim to be older than the US government system are the constitutional monarchies of Britain, Denmark and Sweden – but even this is arguable since they have had significant constitutional changes over the past 200 years.

US getting worried and impatient over euro crisis

The Greek parliament is voting this week on the drastic austerity measures that have been ordered by the EU as a condition for the country receiving the rest of its bailout money. As Washington watches the situation unfold with unease, US officials are voicing an increasing amount of frustration that European leaders do not seem to have the situation under control. And the officials know that if the euro collapses, it could easily take the US economy down with it.

As Quatremer noted today, the euro has become such a powerful currency (now the second reserve currency of the world) that if it runs into trouble it would have a devastating impact not just in continental Europe but throughout the world.

Back in the 1970's when the US took the decision to take the dollar off the gold standard, the situation was watched intensely by the rest of the world. As the US treasury secretary noted at the time, "the dollar is our currency but your problem." Now, with the euro being used by a common market larger than America's, the opposite could be said to America. And the increasing grumblings suggest that American officials don't like being at the whim of decisions being taken across the Atlantic.

Sarko fever: catch it!

Sacre Bleu! I can’t get over these headlines today from the US about Sarkozy’s visit. “We love America, Sarkozy tells Congress” screams ABC. “Bush, Sarkozy stand on common ground” says the LA Times. “Sarkozy -- a Frenchman conservatives can love,” declares the Baltimore Sun. “French President Says America Can Count on France,” contorts Voice of America.

Head to the other side of the Atlantic and the coverage is very different. The BBC focuses on the disaster Sarkozy heads back to today with the headline “France divided as Sarkozy woos US”. Reuters highlights the distaste Sarkozy’s reception in the US will leave with most French people saying “Sarkozy returns from US to skepticism” And the Belfast Telegraph notes that “Sarkozy's warm words mask deep divisions with US.”

Were they watching the same speech?