Swiss franc soars away from the price floor

Good news ahead.

The FT's David Keohane notes that the Swiss franc has soared away from the price floor imposed by the Swiss National Bank in September 2009:

It's now at its weakest level since May 2011. Keohane writes:

The SNB, so long a place of tortured howls and unreserved reserve accumulation, must be a happy central bank right now. Maybe happy enough to start buying back some of the Swiss currency it has been throwing out there over the past year and a half?

Maintaining the currency floor has been an arduous task for the SNB. As I wrote earlier this month:

Although currency speculators have been battering at the floor, the Swiss central bank has held to its promise (but it did drop down to 1.1997 francs for a few minutes back in April last year) by buying a metric shittonne (technical term) of eurobonds. Now that it owns so many of those, it is trying to diversify its holdings into other currencies, "allegedly into Aussies, Loonies (Canada), Scandies, Won?, Real? but above all pounds" according to Evans-Pritchard.

The end of the floor represents one of the more positive signs for the European project recently. If people holding Swiss Francs have started selling them in enough quantities that the SNB doesn't have to do it themselves, then at least the currency markets think something good is about to happen in the rest of the Eurozone. Though there is now the risk that this plays even further into the ECB's complacency.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
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Scotland's vast deficit remains an obstacle to independence

Though the country's financial position has improved, independence would still risk severe austerity. 

For the SNP, the annual Scottish public spending figures bring good and bad news. The good news, such as it is, is that Scotland's deficit fell by £1.3bn in 2016/17. The bad news is that it remains £13.3bn or 8.3 per cent of GDP – three times the UK figure of 2.4 per cent (£46.2bn) and vastly higher than the white paper's worst case scenario of £5.5bn. 

These figures, it's important to note, include Scotland's geographic share of North Sea oil and gas revenue. The "oil bonus" that the SNP once boasted of has withered since the collapse in commodity prices. Though revenue rose from £56m the previous year to £208m, this remains a fraction of the £8bn recorded in 2011/12. Total public sector revenue was £312 per person below the UK average, while expenditure was £1,437 higher. Though the SNP is playing down the figures as "a snapshot", the white paper unambiguously stated: "GERS [Government Expenditure and Revenue Scotland] is the authoritative publication on Scotland’s public finances". 

As before, Nicola Sturgeon has warned of the threat posed by Brexit to the Scottish economy. But the country's black hole means the risks of independence remain immense. As a new state, Scotland would be forced to pay a premium on its debt, resulting in an even greater fiscal gap. Were it to use the pound without permission, with no independent central bank and no lender of last resort, borrowing costs would rise still further. To offset a Greek-style crisis, Scotland would be forced to impose dramatic austerity. 

Sturgeon is undoubtedly right to warn of the risks of Brexit (particularly of the "hard" variety). But for a large number of Scots, this is merely cause to avoid the added turmoil of independence. Though eventual EU membership would benefit Scotland, its UK trade is worth four times as much as that with Europe. 

Of course, for a true nationalist, economics is irrelevant. Independence is a good in itself and sovereignty always trumps prosperity (a point on which Scottish nationalists align with English Brexiteers). But if Scotland is to ever depart the UK, the SNP will need to win over pragmatists, too. In that quest, Scotland's deficit remains a vast obstacle. 

George Eaton is political editor of the New Statesman.