GENEVA - The city bus is packed as it leaves downtown, winding away from the sparkling waters of Lake Geneva and through neighbourhoods sitting hard along the border with France.
Hardly anyone gets off. Then, 40 minutes later, the bus pulls into the parking lot of a Carrefour supermarket just on the other side of the frontier. Dozens of Swiss pile out, returning loaded with groceries half the price of those in Switzerland.
The value of the Swiss franc has soared 18 per cent against the euro over the last 12 months as global investors buy up billions of francs as a safe haven from stock and bond values battered by the U.S. and European financial crises.
The cost of goods in Switzerland was already high compared to those nearby in Europe thanks to the booming Swiss economy. Now, the prices are astronomical, driving down tourism, curtailing exports and sending hundreds of thousands of Swiss across their small country's borders with France, Germany, Italy and Austria in search of euro bargains.
The Zurich daily Tages Anzeiger recently published an index showing that an IKEA stove selling for 1,299 francs ($1610) — cost 130 per cent less in Germany. A deodorant cost 5.90 francs ($7.4) — 174 per cent more in Switzerland — and a child car seat cost 239 francs ($301.4) — 121 per cent more.
The Swiss franc was gaining again against other major currencies after the Swiss National Bank failed Wednesday to peg the franc's value to the euro. The franc had reached near equal value with the euro earlier this month but then fell over the past week as speculation mounted about an intervention.
Outside Carrefour, software engineer Marco Bonifazi grappled with four bags brimming with prosciutto, broccoli and pasta. He carried a backpack was stuffed with couscous, melons, canned corn and a huge plastic jug of dish detergent strapped to the outside.
"It's just great to save money," he said, as he and his wife headed back to the bus.
As many as a half-million Swiss in this country of 7.8 million cross the borders for bargains at least once a month, costing the economy close to 3 billion francs ($3.86 billion) a year, said Thomas Rudolph, a professor of marketing and retail management at the University of St. Gallen.
"Everyone just told us, 'Don't bother shopping in Switzerland anymore. Go to France. Because the franc goes a lot further,'" Claire Till, a British woman who works at a marketing company, said as she closed her Peugeot station wagon's trunk, which was filled with grocery bags.
It's a bitter lesson in the interconnectedness of the European economy for a nation that has proudly rejected integration into the EU.
Strong exports, low unemployment and moderate government debt have keep the Swiss economy strong after bouncing back from a 2009 downturn, particularly when compared with European neighbours struggling with massive national debts that have devastated confidence in their stock markets and ability to repay their government bonds.
Geneva and Zurich are consistently ranked among the priciest cities on the planet, and International Monetary Fund ranked Switzerland last year as the 19th biggest economy in the world, with a gross domestic product of more than 487 billion francs ($626 billion).
Switzerland maintains open borders with its neighbours and more than 2 million people live close to the frontiers. But since the Swiss live outside the EU's economic union, they're eligible for refunds on the 19-20 per cent value-added tax they pay in German, French, Italian and Austrian stores. They come out ahead even after paying the 8 per cent VAT that Switzerland requires on items brought over the border.
For evidence of what the strong currency is doing to Swiss business, consider the plight of a new 120-store shopping mall in Basel, Switzerland, close to Germany and France.
All the Swiss have to do is drive a few minutes more past the Stuecki Shopping Center to get to the eurozone, where their potent franc can buy the same trousers, detergent, contact lenses, stoves and magazines for half the price.
"The Swiss people are doing a little bit of cherry-picking. Of course, we feel it," said Jan Tanner, the mall's director and board president of the Swiss Council of Shopping Centers and director of the mall.
Inside the mall, which cost more than a quarter-billion francs to build and boasts climate-friendly heating and cooling, the lunch crowd swelled the fast-food court, but there were few other customers wandering its stylish glass and steel corridors, where new BMWs were parked on display.
Zurich-based Location Group declared the mall a "disgrace" in a retail market study earlier this year, saying at least one-third of all tenants would move immediately if they could because sales "fall well short of the worst-case hopes." It partly blamed the franc.
The towering white monolith also was supposed to revitalize a rough section of this northern industrial city, but Tanner says the mall will need to attract a quarter to a third more customers over the next several years or it won't succeed.
"It's a big challenge for all of us," he said. "Because a lot of the Swiss are doing their shopping in Germany and France."
Tobias Mueller, managing partner of a Basel firm that evaluates other companies' performance, said he stopped by the Stuecki mall to replace a broken cellphone but usually goes to Germany for major purchases. He said he worries about what that does to the Swiss economy — but not too much.
"I know that it's complaining on a comfortable level," he said. "I don't think that we, as Swiss people, have to worry as much as our neighbours, because our national economy is much healthier."
At the mall, some managers said they, too, go to Germany to shop. They said the mall just isn't attracting enough people and faces still more competition from downtown stores near popular sidewalk cafes and bars.
They said the only times there's plenty of customers is during bad weather or special marketing events but emphasized that when the mall opened in 2009, the euro was worth about 1.60 francs.
"If the borders weren't here, things would be better," said Melanie Franz, manager of a hair products store that opened in May.
Swiss consumers, particularly those further away from the borders, are increasingly angry at businesses that keep prices high without passing along savings from their increasing purchasing power thanks to the strong franc.
The price checks in Swiss newspapers and by consumer groups haven't exactly gone unnoticed in government. Swiss economics minister Johann Schneider-Ammann has said the Swiss Cabinet and Federal Competition Commission might have to get involved, and the federal price watchdog is holding talks with producers and wholesalers.
The worst retail impact of the strong franc is on local merchants and stores that don't sell food, since grocery chains are somewhat protected by government restrictions on imports such as meat and fresh produce.