The Swiss once thought they had licked inflation. Now, after years of enjoying rates among the lowest in the world, they know better. Swiss consumer prices are moving up -- to the consternation of everybody from the country's surprised central bankers to the household help.
Says Martha Soardi, a cleaning woman in the lakeside village of Ruschlikon, near Zurich: "It's carzy. Suddenly I am paying more for everything. Why, I estimate that to feed my family of four it cost around 900 francs  last, and now I am giving out 1,200 francs [$600]."
From an average of 4 percent in 1980, inflation rose rapidly in the first few months of this year to around 6 percent, and food, construction, and rent costs are headed higher. The pessimists are predicting an annual rate of more than 7 percent for 1981, and even the most optimistic expect no major turnaround this year.
To those living in countries with galloping inflation, such rates must look pretty insignificant. But for the Swiss a level anywhere over the 4 percent mark is not only "intolerable," to quote Swiss National Bank president Fritz Leutwiler, but even becomes "alarming" at 6 percent.
Why this concern over an inflationary figure that is mild by international standards?
The cost of living in Switzerland is already among the highest in the world, as are its wages. Swiss exports are already fighting a tough competitive battle against exports from countries with lower labor costs. Any rise in inflationary only makes the battle all the tougher for Swiss corporations, because the Swiss tourist industry, still one of the country's biggest money spinners, loses to places like Austria and the Caribbean when domestic hotel prices peak.
"The cost explosion is the biggest problem facing Swiss corporations in the ' 80s," explained Robert Lang, president of the Shaffhausen-based Georg Fischer Ltd., a machinery concern. "In fighting that, inflation is our greatest opponent."
The Swiss were justifiably proud of their inflation record. Between the end of 1974 and '78, they managed to bring it down from around 10 percent to 1 percent. Even when the dramatic weakening of the US dollar against the franc forced authorities to blow up the money supply by buying dollars to stabilize the currency system in the latter half of 1978, inflation remained within limits. It was 3.6 percent in 1979.
Last year Swiss monetary authorities thought they were on the right track with a "moderately restrictive" money policy. As late as December, Mr. Leutwiler, the central bank president, confidently predicted that inflation would fall back to 3 percent as of spring 1981.
What went wrong?
The Swiss experience shows that an antiinflation policy is only as good as the forecasts on which it is built, and they can be shaky.
This is what happened. United States interest rates did not go down, as the Swiss expected. Their working hypothesis foresaw a strengthening of the franc as US rates dropped and money poured back into the Helvetian currency, thereby reducing imported inflation. Switzerland has no raw materials except water, and is more than 70 recent dependent on foreign sources of energy and over 60 percent on food imports. The country's susceptibility to international price rises can be countered only by a revaluating franc.
Domestically, Swiss monetary authorities anticipated a cooling of the economy in 1980. Instead, gross domestic product (GDP) grew at what is, for Swiss conditions, the lively tempo of a real 3 percent.
Armed with these misleading predictions, interest rates were kept low and the money supply developed at an inflationary trot. Only this year did the errors become fully evident. In January, inflation accelerated into a rapid climb.
Quick to admit that it went wrong, the Swiss National Bank is pushing a restrictive money policy with the determined intention of dampening credit demand. Interest rates have risen successively. A deliberate slowdown of the economy is under way. As a result, real GDP growth is put at a probable 2 percent this year, but as restrictive policies take hold, the growth rate is expected to be less than zero in 1982.
The Swiss have a trump card when it comes to fighting inflation. The country's traditional shortage of workers makes unemployment a minor worry. At the moment there is 0.2 percent unemployment in Switzerland, and corporations scream that they cannot find enough workers in the dried-out labor market.
Insensitive as it may seem, if things do get serious there is always a cushion of half a million foreign workers.They would be the first to feel the pinch. More than 150,000 jobless workers and their families left the country during the inflation fight of the '70s.
With concern over unemployment pushed into the background, the inflation battle becomes easier. Nevertheless, Leutwiler warns, "an inflation drop is only paid for with a recession."