The airline industry earlier this week was beaming, as a new survey gave it its highest customer service numbers in 4 years. But with the economy still struggling to make a comeback, airports may need to readjust their plans as demand and dollars are dipping. KJZZ’s Tony Ganzer reports. Continue reading “Down Economies and Airports”
When the CEO of Switzerland’s biggest bank calls tax disputes with the United States and other nations “an economic war” people take notice. UBS CEO Sergio Ermotti said that last month, as Switzerland faces a still contentious relationship with its neighbors and the U.S. hunting for untaxed assets hidden in the alpine confederation. The U.S. is the world’s only super-power, and has not shied from using its economic and diplomatic might to seek and reclaim back taxes, and punish banks who helped hide the money. But in any war, even an economic one, there are casualties. And the changes Swiss banks have made in response to the U.S. have made things for some Americans in Switzerland much more difficult.
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Katherine moved to Switzerland from Ohio in 2008 to be an Au Pair. The US was in the middle of its financial crisis and she figured “why not?” First order of business in Zurich was to get a bank account.
“I had gone to I think it was UBS the first time, and they had said that they didn’t offer any bank accounts to Americans who had less than $250,000,” she said. “My boyfriend, at the time, and I just laughed at that, like, ‘she has to have a bank account. She’s going to be living here.’”
Katherine was ultimately granted a young person’s account at UBS. Now, years later, the graphic designer and her husband are having account troubles again, trying to get a mortgage.
“We got so far along in the mortgage process that people were telling us it was a good time to buy, and then it was only literally right before we were going to sign the contract that we were finding out, ‘Wait a minute, she’s American, this is a red flag, this is a problem.’” …
Before leaving Cairo, WRS’s Tony Ganzer gathers the views of people across various sectors in Egypt, including those with organizations headquartered in Switzerland, to find out whether they think the country is on the right course:
Despite the constant din of Cairo traffic and residents, there are still quieter spots in certain parts of the city. Occasionally one finds a place along the Nile. It’s also relatively calm in the southern Cairo neighborhood of Maadi. It’s where the Geneva-based International Committee of the Red Cross has its offices.
SPREYERMANN: “The transition is not yet over. It has changed to a large extent from the demonstrations, frequent demonstrations, and related to that clashes with the police. It has changed from that to the more political process.”
Klaus Spreyermann is the head of delegation for the ICRC in Egypt.
SPREYERMANN: “Many services and decision makings are slowed down, if not blocked, due to the fact that nobody knows today, and that is really a new perspective, nobody really knows exactly where the country is going on a political level. We have seen 70 percent of Islamist parties actually being represented in the new parliament. How this is going to affect the country, where it is going, these are things we can’t clearly see.”
The ICRC has been in Egypt since at least 1935, Spreyermann says, giving it much time to watch Egypt’s changes over the years, but it’s unclear what the country will soon look like.
Spreyermann is convinced the next great challenge here will be economic.
SPREYERMANN: “With the tourism down, not surprisingly with all this bad or disturbing news that people get from Cairo too often, this is very practically influencing the possibility for income for the population. You add to that, for example, the return of hundreds of thousands of people who used to work in Libya, due to the conflict. These remittances are not coming back.”
These economic challenges, and those particularly affecting refugees in the region, are some of the biggest concerns of the UN’s Refugee Agency, UNHCR. Karmen Sakhr is the Senior Protection Officer at the UNHCR Cairo office.
KARMEN SAKHR: “I have to say that the situation is not very ideal, because socially, economically it is challenging for the persons of concern, so we deal with a lot of frustration. I think that colleagues have been doing a great job in managing, at the same time, the changes, the political changes in the country, and with our persons of concern here. It has been a very, very exhausting year.”
Sakhr says things in Egypt aren’t as bad as some might think they are, though there are problems. Some observers, like the Swiss government, are offering aid in the time of uncertainty. Benjamin Frey is the deputy head of the Swiss Programme Office, in the Swiss Embassy in Cairo.
BENJAMIN FREY: “Well I think it’s fundamental to understand that this country does not necessarily have a democratic past. It means that there is, of course, a potential here. There is a civil society that had very much trouble functioning under the Mubarak regime.”
That means the Swiss are aiding NGOs, the media, but also the Egyptian government to understand democratic systems.
But some problems could be institutional. Khaled Fahmy is the chair of the history department at the American University in Cairo.
KHALED FAHMY: “It’s business as usual, but people are not as usual. The people have changed. The government hasn’t changed. It is up to you, and to your listeners, to make up their minds on whether or not the revolution has succeeded. I think that if people change, that is the most difficult thing. We see a very determined effort on the part of the regime to stay in power, this is a very, very well-entrenched regime. So it’s not easy, it’s not going to be dislodged in a day or two, or indeed, not even in a year or two.”
As Egypt continues to feel its way toward a new type of governance, Fahmy thinks the most confusing, and dangerous actor is the ruling military council. It is inherently undemocratic, like any military, he says. He disagrees with but doesn’t worry about the rise of political Islam in Egypt.
But the lack of control and oversight over the ruling military, Fahmy says, is a grave danger to democracy.
The Swiss textile industry last week sounded what has become a regular call for help from exporters and industrial sectors: the Swiss Franc is over-valued, they said, and companies are hurting. Just in November the Eschler textile firm threatened to shutter its Swiss production sites in Thurgau and Appenzell, because of foreign competition and a debilitating Swiss Franc. WRS’s Tony Ganzer takes us inside one Swiss textile company, to see whether industry nerves are as tightly wound as its products.
Though other Swiss industries often get more attention, like those for watches or precision tools, textile companies have also long been making a mark..
KÄGI: “We are here in our old building built in 1856.”
Martin Kägi walks toward a room filled with bales of California cotton in Sennhof, near Winterthur. Kägi is CEO of Hermann Bühler, a fine yarn spinning mill. 10 or 12 tons of yarn roll out of this factory a day, with the process beginning with complex machines sorting and cleaning the cotton.
KÄGI: “Basically it has optical sensors which look at the cotton tufts, so that it can detect fibers with different color, visual color, but also fibers from different material.”
“There are not many, very many, people operating our machines. This is an important reason why we still can exist here in Switzerland, running a spinning mill, because it is not very labor intensive. If it would, it would be much more difficult.”
Kägi says the textile business has faced a double-threat in recent years, forcing it to rethink itself. The first threat came from mass-producers of textiles mostly in Asia, churning out products much faster and much cheaper, making the Swiss look for a niche.
KÄGI: “We try, of course, to, to specialize; to produce more unique yarns which are hard to copy, for which we can demand a somewhat higher yarn price.”
Another challenge hitting Swiss spinning mills, clothing makers, weavers is the strength of the Swiss Franc, primarily related to the Euro and the US dollar. Thomas Schweizer is director of the Swiss Textile Federation.
SCHWEIZER: “This is a problem for most of our companies, because from the exports we have 75% or 80% are going to Europe. If they only were 20% going to Europe, the problem would be smaller.”
KÄGI: “We see that we spin a yarn directly from a sliver; and spin a yarn that is bound on a spool that we can directly sell to our customers.”
Kägi there refers to a sliver of cotton, which is like a fine yet fluffy string about to be spun. This spinning mill benefits from having a subsidiary in the US state of Georgia, operating with 150 employees working in Dollars. And many Swiss companies have foreign operations, but administration and still some production costs are figured in Swiss francs, keeping the pressure on.
Federal statistics have shown a steady decline in export and order numbers. In the first 9 months of 2011 textile exports dropped 4 percent. And CEO Kägi says that hurts to the tune of 10%:
KÄGI: “10% is a lot in the yarn business, because the yarn business is a volume business to a certain extent. And we typically have relatively small margins, and if the currency makes us 10% more expensive that eats away lots of our margins. So we are strongly affected.”
KÄGI in turbine room: “What we see here is a diesel motor…”
With such tight margins, textile federation chief Schweizer says companies are looking for money where they can. This spinning mill has its own turbine and generator held over from its 19th century beginnings. New Swiss laws on selling energy from sustainable sources back to the main power grid means some cash can be earned by use of this…
…the River Toss, just outside the mill. But the fate of companies like this, and their employees, don’t depend on a little extra money, and more on how the story of global sentiment and currency markets unravels.
Despite its healthy share of sunshine, a dark cloud hangs over the canton of Ticino. A tax battle with neighboring Italy is aggravating cross-border relations — and it shows no sign of ending. Negotiations on a new double-taxation agreement between Switzerland and Italy have bogged down, with banking secrecy a key stumbling block. Fed up with waiting, the Ticino authorities last month took matters into their own hands, by blocking 30 million francs in taxes bound for Italy. Some Italian politicians took notice, calling for tax talks to start immediately, but progress is still slow-going. WRS’s Tony Ganzer reports:
The canton of Ticino is kind stuck between a rock and well..an international border. On one side stands a mountain range, separating the canton from the rest of Switzerland. On the other side is a vital trading partner–Italy. And caught in the middle are some businesses who say this tax fight is strangling the canton’s life blood—cash.
Take the Gruppo Siccurezza for example. The Lugano company with about 40 employees installs high tech security equipment, like CCTV cameras, or alarms, and it operates a 24-7 monitoring center for customers.
“Last year my company has suffered twice: the loss of clients, and twice because of the strength of the Swiss francs. We did lost about 25% of income,” says Company Chief Financial Officer Lorenza Bernasconi.
She says she’s lost about 20 clients, and has had to fire one employee since Italy added Switzerland to a black list of tax havens requiring more paperwork and fees to do business over the border.
Bernasconi says there is no doubt why customers left.
“Everyone told us because of these taxes, because of the black list. They are clients since 10 years, 8 years. It’s a pity,” she says.
In real terms, Bernasconi says the extra work could cost 3 or 400 euros every few months. For a security package costing 500 euros a year, those fees take away her business’s advantages.
Simona Morosini Marconi is vice director of Ticino’s chamber of commerce. She says the tax battle with Italy has gotten worse, and new requirements have burdened Ticino companies, especially those with Italian clients. She says the strong Swiss franc has hurt as well, though she admits the problem isn’t yet tragic—businesses are hanging on.
But any problem hurts, because, she says, the region lives from its connection to Italy.
“The peculiar situation that you can see here in Ticino concerning the people who work in Switzerland and in the evening go back home, is definitely due to the very nature of the Italian state and Italian economy,” says Nanad Stojanovic, who teaches political science at the Universities of Lausanne and Zurich. He is also a cantonal politician in Ticino representing Social Democrats.
“The Italian government itself is in a very difficult position, or let’s say even in a mess, because the coalition of Berlusconi is a rather weak one,” he says.
Italian Prime Minister Silvio Berlusconi has had to rely more on the populist Lega Nord party, Stojanovic says, which takes a more hard-line to taxes and Switzerland.
Meanwhile the populist Lega dei Ticinesi has connections with Lega Nord, but itself takes a hard-line on Italian workers crossing into Switzerland.
“This is a weird part of the story,” Stojanovic says, “because the economy of the canton of Ticino is clearly dependent on these workers coming every day from Italy to work in Ticino, and going back in the evenings.”
Stojanovic says this complicated political reality has made tax negotiations between Italy and Switzerland difficult, compounded by the Italian debt crisis, and long-standing dispute over Italian money hidden in Swiss banks.
For Lorenza Bernasconi with Gruppo Siccurezza, she can only hope for an agreement.
“The problem is that the Confederation doesn’t consider this problem like a [priority], but for the Italian part of Switzerland it is a big issue,” she says.
Both Italian and Swiss officials have said they are open to negotiations, but a concrete deal to end the tax fight is still out of sight.