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MONEY

How Switzerland chose the franc as its currency

We carry it in our wallets and use it every day to purchase all kinds of goods and services. But have you ever wondered how the franc became Switzerland’s currency?

Published: 10 January 2022 16:09 CET
Just to think that we could have still been spending ducats or guilders. Photo by Claudio Schwarz on Unsplash
Just to think that we could have still been spending ducats or guilders. Photo by Claudio Schwarz on Unsplash

To answer this question we have to go back to 1849 – the year before was a decisive turning point in the country’s history.

September 12th, 1848 marked the creation of the Swiss federal state and its new Constitution, and Bern became the seat of the government the same year.

READ MORE: Why is Bern the ‘capital’ of Switzerland?

But while many political matters were put in order, some issues still needed to be settled.

For instance, there was much chaos surrounding Switzerland’s regionally-based currencies.

In an article titled “The difficult birth of the Swiss Franc”, Swiss National Museum writes: “If you were travelling through the young federal state in 1849, you had to either have at least ten money purses, or be constantly running to the change money. In Zurich people paid with ducats or thalers, in Schwyz they wanted centimes, and in Chur the bill for your dinner was in batzen”.

Two Zurich ducats. Image: Swiss National Museum

Such a disparate monetary system was not sustainable so a single currency had to be introduced. However, the debate over what system this unified currency should be based on fuelled disputes and sparked controversy.

“It was necessary to choose between the decimal system of the French franc and that of the guilders of southern Germany. This question divided our country: French-speaking Switzerland, Bern and Basel wanted the franc, eastern Switzerland and Zurich wanted the guilder” the article says.

The government commissioned a prominent banker and politician Johann Jakob Speiser to carry out an assessment. He concluded that Swiss monetary system should be based on France’s, as franc would improve Switzerland’s access to the global economy.

The supporters of the guilder, however, didn’t agree and they started to collect signatures on petitions against the French system.

“But all the pleading, begging, cajoling, ranting and cursing was of no use”, the museum article states. 

The parliament introduced the franc and the corresponding federal law on the national currency was enacted in May 1850.

But then “new trouble loomed”: the sitting Helvetia figure created by the Geneva engraver Antoine Bovy angered many politicians. They claimed the figure was too ugly and “unlike the archetypes from antiquity, she wasn’t holding anything in her hand”.

Sitting Helvetia didn’t win over fans. Image: Swiss National Museum

This stance was summed up by the Neue Zuger Zeitung, which wrote that Helvetia “was reaching into every cash register, bag, purse and savings bank and challenging the old money that people had been used to for 100 years”.

The National Council also suggested the “Helvetia that everyone loathes” be removed from the new coins.

But the woman symbolising Switzerland remained in sitting position until 1875. She has been standing ever since.

The decision not to adopt the guilder system turned out to be a good one, the article noted. By the end of 1871, the German Empire adopted the mark as its single currency, and the guilder, thaler and ducat slowly disappeared from circulation.

READ MORE: Why does Switzerland use ‘CH’ and what does it mean?

Member comments

  1. To the editor-I would like to read more about the Swiss WIR currency – but thank you for this informative article!

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For members

PENSIONS

What happens next after Switzerland’s ‘historic’ pension vote?

Swiss voters on Sunday overwhelmingly backed a proposal to increase pension payments for retirees. But what happens now?

Published: 4 March 2024 11:40 CET
What happens next after Switzerland's 'historic' pension vote?

In a move that is being hailed as “historic” by supporters at a time when the country’s ageing population faces surging living expenses, the newly-accepted ‘13th pension’ initiative now has to be implemented.

READ ALSO: Swiss voters approve boost to pension payments

This is what pensioners in Switzerland can expect in the coming years:

How much additional money will retirees receive?

For a full pension, single people will receive a supplement ranging from 1,225 francs to 2,450 francs per year — that is, an amount equal to their monthly first-pillar AHV / AVS pay.

Couples will receive up to 3,675 additional francs.

When will this measure take effect?

If you are hoping the 13th pension will kick in immediately, that is not going to happen; you will have to wait two years.

The new law will be implemented from 2026, which is a relatively short time, considering that many measures take years to be enforced after being accepted in referendums.

The reason for the delay of this particular new law is that the Federal Council must now decide where the extra money should come from (read more about this below).

How will the 13th pension be paid out?

It’s not yet clear, but several options will be explored.

So far, it is unlikely that the money would be paid all at once in December, according to Swiss media reports.

It could, for instance, be paid out in two installments during the year, or pro-rated and added to the AHV / AVS payment each month.

How much will the new measure cost?

This year, all the ‘regular’ first-pillar payments will cost 50 billion francs.

Once the new law goes into effect, however (that is, in 2026), an additional 4.2 billion francs will be needed.

This amount will increase as each additional generation starts to draw retirement benefits.

Where will the money come from?

As the government had warned ahead of the vote, the money that is currently in state pension accounts will not be enough, over the long term, to fund the additional payout.

In the immediate future, however, the situation doesn’t look dire — mostly thanks to the increase in the retirement age for women, which currently is 64.

But starting in 2025 and until 2028, Switzerland will gradually implement the same retirement age for women as for men — 65 — a move that is expected to boost coffers of the old-age pension scheme.

Another source of additional funding will be Value-Added Tax (VAT), which rose from the former rate of 7.7 percent to 8.1 percent at the beginning to 2024.

This extra funding, however, will not be enough in the long term, as more people retire and start drawing pensions.

This is where the burden of financing the pension scheme will fall on the younger generation.

One of the proposals of the supporters of the initiative is that employees’ and employers’ contributions to the AHV / AVS fund be increased by 0.4 percent from 2030 onwards.

Others propose introducing an inheritance tax for wealthy people. At this point, however, no definite financing plans exist.

Will foreigners in Switzerland benefit from the 13th pension as well?

Everyone who is legally employed in Switzerland and contributes into the obligatory state pension scheme will receive extra payouts, regardless of nationality.

One ‘weak’ point of the new law, as opponents have pointed out, is that all retirees in Switzerland — even those who are well off — and not just those who really need it, will receive this 13th pay.  

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