An economy under encirclement, 1939–1945

Between two blockades

Switzerland entered the war as a highly industrialised country without raw materials, dependent on imports for most of its coal, iron, oil and a large part of its food. The outbreak of war placed it between two systems of economic warfare. The Allies imposed a blockade on Germany and controlled the imports that neutral countries could receive through the sea routes, while Germany and Italy answered with a counter-blockade that controlled the land routes through their territory. The historical encyclopaedia describes Swiss foreign trade as caught between these two “blockade rings”, the Allied blockade and the German-Italian counter-blockade.¹ Every commercial decision of the Federal Council had to be negotiated with both camps, and every concession to one side risked a reprisal from the other.

The military situation after June 1940 sharpened this dependence. Once France had been defeated, Switzerland was surrounded almost entirely by Axis or Axis-controlled territory, with only a narrow link to unoccupied France through the Geneva region. When German troops occupied southern France in November 1942, the encirclement became complete.² From that moment all Swiss trade with overseas markets and with the Allies depended on German and Italian transit permits. The Swiss economy thus had to earn its raw materials and food by trading with the power that surrounded it, while keeping enough credit with the Allies to secure the overseas supplies that passed through the blockade under navicert control.

The response of the authorities combined domestic mobilisation with bilateral trade diplomacy. The cultivation programme associated with Friedrich Traugott Wahlen expanded the area under the plough and became a symbol of national self-reliance, although it never made the country self-sufficient in food.³ The trade negotiations with Germany were conducted by a small group of officials and business representatives, among them the head of the trade division of the Federal Department of Economic Affairs and the leaders of the main business associations. Their task, as they understood it, was to keep the factories supplied and the population fed without surrendering sovereignty.

The reorientation of trade

The Independent Commission of Experts later measured how far the war shifted Swiss trade towards the Axis. Before the war, Germany and Italy together accounted for roughly 30 per cent of Swiss imports and roughly 20 per cent of exports. In 1941 and 1942, at the height of German expansion, their share of imports rose above 40 per cent while their share of exports exceeded 50 per cent.⁴ The same study observed that the chemical, machinery, watch and instrument industries enjoyed a genuine boom between 1940 and 1943. It interpreted Swiss foreign economic policy as a complex exchange with two warring alliances, a formula that avoids both the older image of heroic resistance and the later image of simple collaboration.

The armaments industry formed the most sensitive part of this trade. Between 1940 and 1944, exports of weapons, weapon components and ammunition reached CHF 751 million, or 10.6 per cent of all Swiss exports of goods. If fuses and military optics are included, the figure exceeds CHF 1 billion or 14.3 per cent of exports. Of the weapons and ammunition exported in these years, 84 per cent went to the Axis states, while the Allies and the neutral countries each received about 8 per cent.⁵ The largest single exporter was a Zurich firm. Werkzeugmaschinenfabrik Oerlikon, controlled by Emil Georg Bührle, supplied 52 per cent of these exports, far ahead of Tavaro in Geneva, Dixi in Le Locle and Hispano Suiza in Geneva. The Commission estimated that the 14.3 million rounds of 20-millimetre ammunition supplied by Swiss firms corresponded to the ammunition needed to shoot down between 2,200 and 2,850 Allied aircraft. The fortune that Bührle built in these years later financed one of the great private art collections of Zurich, whose display in the extension of the Kunsthaus has kept the question of wartime profits alive in the city until the present day.⁶

Clearing and state credit to the Axis

Trade with Germany was not settled in free currency. Since 1934, payments between the two countries had passed through a bilateral clearing system in which importers paid the sums owed to foreign suppliers into a national clearing account and exporters were paid out of it. The Swiss side of this system was run by the Schweizerische Verrechnungsstelle, the Swiss Clearing Office, which the Federal Council established on 2 October 1934 as an independent public-law institution with its seat in Zurich. Before that date, the Swiss National Bank had handled clearing operations itself, from 1931 to 1934. The Clearing Office verified payments, regulated disbursements in the various bilateral clearings and carried out freezes of foreign assets when the government ordered them. It employed 164 people at the end of 1934, of whom 113 worked on the German clearing, about 400 in 1944 and a peak of 820 in 1949.⁷ In the post-war years this Zurich office became the administrative centre for the registration and liquidation of German assets, a function discussed below.

The clearing system had a structural consequence that shaped the whole war economy. When Swiss exports to Germany exceeded imports from Germany, Swiss exporters could be paid only if someone advanced the money. After the defeat of France, the Federal Council agreed to do so. In the clearing agreement of 9 August 1940 it granted Germany a credit limit of CHF 150 million, which it raised to CHF 850 million in July 1941.⁸ With further advances of CHF 271 million, the total state credit to Germany reached CHF 1.121 billion. Italy received credits of CHF 390 million in the form of clearing, bank and railway transport credits. Stefan Frech, who studied the clearing for the Independent Commission, calculated that the credits to Germany alone corresponded to about 10 per cent of total federal expenditure during the war years. He concluded that the clearing credits served the war finance of the Axis powers and that the state credit as a whole should be regarded as a financial “tribute” to the Axis states.⁹

The word “tribute” captures the logic of the arrangement. The credit allowed Germany to buy Swiss machine tools, precision instruments, fuses and ammunition without paying for them at the time. In return, Germany allowed coal and iron to reach Switzerland and granted transit permits for Swiss trade with the rest of the world. The Federal Council saw this as the price of economic survival and, in the view of many officials, of military security as well. The costs of the credit fell on the federal budget, while the profits of the export trade accrued to private firms. After the war, Italy repaid CHF 232 million by 1949 and the Federal Republic of Germany paid CHF 650 million under the settlement of 1952, so that a substantial part of the credit was recovered, although not all of it.¹⁰

The Swiss franc as the last free currency

The most important Swiss asset in the eyes of the belligerents was neither a factory nor a railway tunnel. It was the Swiss franc. After the United States entered the war in December 1941, the franc remained the only freely convertible currency in continental Europe. The Commission’s report on ransom extortions in the occupied Netherlands noted this fact as the reason why German agencies demanded payment in francs.¹¹ Germany needed francs to pay for strategic raw materials in Portugal, Spain, Sweden, Turkey and Romania, whose suppliers would no longer accept Reichsmarks. Between autumn 1939 and spring 1945, according to Frech, Germany obtained about CHF 2 billion in free Swiss francs.¹²

The main channel through which Germany obtained these francs was the sale of gold. The Reichsbank had little gold of its own at the outbreak of war, because its reserves had been exhausted by rearmament. It acquired large quantities after 1938 by taking over the reserves of the Austrian National Bank and of the Czechoslovak central bank and, after 1940, by seizing the gold of the central banks of Belgium and the Netherlands, among others. Selling this gold in Switzerland for francs was the most efficient way to turn it into purchasing power on the world market. The following section examines how this trade worked and what the Swiss National Bank knew about it.

Notes

1. Historisches Lexikon der Schweiz (HLS), “Zweiter Weltkrieg”, section on the war economy, https://hls-dhs-dss.ch/de/articles/008927/. ↩
2. HLS, “Zweiter Weltkrieg”, https://hls-dhs-dss.ch/de/articles/008927/, which describes Switzerland as largely surrounded by the Axis powers after the defeat of France in June 1940 and as completely encircled after the occupation of southern France in November 1942. ↩
3. Albert Tanner, “Anbauschlacht”, in HLS, https://hls-dhs-dss.ch/de/articles/013783/: Wahlen presented his plan on 15 November 1940. The area under the plough rose from 183,000 to 352,000 hectares by 1945, well short of the target of 500,000 hectares, while the degree of self-sufficiency rose only from 52 to 59 per cent. The campaign served above all as a national symbol of the will to resist. ↩
4. Martin Meier, Stefan Frech, Thomas Gees and Blaise Kropf, Schweizerische Aussenwirtschaftspolitik 1930–1948: Strukturen – Verhandlungen – Funktionen, UEK publications vol. 10, summary, https://www.uek.ch/de/schlussbericht/Publikationen/Zusammenfassungenpdf/10d.pdf. The study also notes that the share of exports in Swiss net national product had fallen below 20 per cent in 1930 and did not rise above that level again until 1949. ↩
5. Peter Hug, Schweizer Rüstungsindustrie und Kriegsmaterialhandel zur Zeit des Nationalsozialismus, UEK publications vol. 11, summary, https://www.uek.ch/de/schlussbericht/Publikationen/Zusammenfassungenpdf/11d.pdf. ↩
6. Wikipedia (German), “Stiftung Sammlung E. G. Bührle”, https://de.wikipedia.org/wiki/Stiftung_Sammlung_E._G._Bührle: the collection moved into the new extension of the Kunsthaus in October 2021. The independent review of the foundation’s provenance research by Raphael Gross was presented in June 2024 and recommended that some 90 works be re-examined. ↩
7. HLS, Martin Meier, “Schweizerische Verrechnungsstelle”, https://hls-dhs-dss.ch/de/articles/047125/. The Clearing Office was dissolved on 1 January 1979 after the last clearing agreements had expired in the mid-1970s. ↩
8. UEK publications vol. 10 (Meier, Frech, Gees, Kropf), summary, https://www.uek.ch/de/schlussbericht/Publikationen/Zusammenfassungenpdf/10d.pdf. The date of the agreement of 9 August 1940 also appears in the parliamentary chronology “Die Schweiz im Zweiten Weltkrieg”, https://www.parlament.ch/centers/documents/de/ch-wk2-chronologie-d.pdf. ↩
9. Stefan Frech, Clearing. Der Zahlungsverkehr der Schweiz mit den Achsenmächten, UEK publications vol. 3, summary, https://www.uek.ch/de/schlussbericht/Publikationen/Zusammenfassungenpdf/03d.pdf. According to the same study, about 80 per cent of German payments to Switzerland during the war passed through the clearing. ↩
10. UEK publications vol. 3 (Frech), summary, https://www.uek.ch/de/schlussbericht/Publikationen/Zusammenfassungenpdf/03d.pdf. The HLS also puts the German credit at CHF 850 million and the Italian clearing credit at CHF 215 million: HLS, “Zweiter Weltkrieg”, https://hls-dhs-dss.ch/de/articles/008927/. ↩
11. Unabhängige Expertenkommission Schweiz – Zweiter Weltkrieg (UEK), Die Schweiz und die deutschen Lösegelderpressungen in den besetzten Niederlanden, Bern 1999, https://www.uek.ch/de/publikationen1997-2000/loesegeld.pdf. ↩
12. UEK publications vol. 3 (Frech), summary, https://www.uek.ch/de/schlussbericht/Publikationen/Zusammenfassungenpdf/03d.pdf. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.