Soaring Swiss franc puts squeeze on German enclave

BUESINGEN, Germany Fri Sep 2, 2011 11:08am EDT

BUESINGEN, Germany (Reuters) - Since a 19th-century treaty established a German village wholly within Switzerland, the people of Buesingen have become accustomed to navigating between Berne and Berlin.

Yet for the residents of this leafy village of 1,400 on the banks of the river Rhine, the record-strong Swiss franc is generating even more heat than the summer sun.

Buesingen has both a Swiss and German postal code, and in front of the mayor's office there are both German and Swiss telephone booths. Swiss sales tax applies in the handful of shops, though politically the village belongs to the German state of Baden-Wuerttemberg.

Rents and groceries are generally quoted in francs. But some residents receive pensions in euros, and income taxes are paid at German rates, well above those standard in Switzerland.

Mayor Gunnar Lang said about 10-20 percent of the village's residents are feeling the pinch due to the runaway Swiss currency, which has shot up 30 percent against the euro since the collapse of Lehman Brothers in 2008 at the height of the global financial crisis.

About 100 people have in recent years chosen to leave Buesingen and move to Switzerland, to take advantage of lower taxes. With the franc not far from parity with the euro, still more may go.

"That's leading those who are still here to start thinking about whether they should move to Germany too. That's really bad for Buesingen," Lang said, adding that the most frequent complaints were of rising rents and people being pushed into higher tax brackets with no change to their real income.

In Switzerland, the strong currency is beginning to throttle the economy: exports are softening, corporate profits are slipping and politicians are warning of rising unemployment.

At Buesingen's post office, Stenka Vonnau, who receives her salary in euros, said she considered moving or looking for a second job. Nearby, the restaurant Kranz has posted a billboard outside saying "euros OK" in a bid to draw in diners.

Yet former sailor Ernst Winter, whose arms are covered in tattoos and who repairs horse bridles in a shop down the road, was less dour about the exchange rate despite receiving a pension in euros.

"I used to work on boats and we had lots of currencies -- China, Australia, who knows what."

After quitting the sea for dry land, Winter decided to settle in Buesingen because he thought it was nice and has no plans to leave: "It's great. You're in two countries at once."

After the two world wars there were efforts among the village's residents to join Switzerland, but after the Swiss began allowing EU citizens to take up residence without great hurdles, much of the impetus for changing sovereignty has been lost.

Lang, who has been mayor for 21 years, said the people of Buesingen would just have to muddle through, as little help could be expected from authorities.

Ending Buesingen's status as a geographical oddity is not a realistic goal, he said, because ceding it to Switzerland would require changes to both the German and Swiss constitutions.

"They have trouble sorting things out for Buesingen that are far less important," he said. "So I don't expect they'll be able to change the constitutions to clear things up."

(Reporting by Catherine Bosley, editing by Paul Casciato)

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