My wife and I are avid hikers, and a few months ago we decided to expand our horizons with a January 2015 snowshoeing trip to the Swiss Alps. Ten days before our scheduled departure date, the Swiss National Bank announced an end to the Swiss currency peg of 1.20 Swiss francs to the euro, and the Swiss franc jumped about 18 percent in value. I emailed my wife to ask if she had told them we were coming. 

A few days later, Greece’s newly elected prime minister, Alexis Tsipras, announced plans to dismantle the austerity measures imposed by European Union leaders and the International Monetary Fund in the latest Greek bailout package, refused to negotiate any extension the international bailout, and even pledged to seek World War II reparations from Germany. The call for reparations was not well-received in Berlin, and British Prime Minister David Cameron began preparations for a possible Greek exit from the eurozone.

The population of Switzerland is about 8 million; the population of Greece, 11 million. So why should we care about two smallish countries in Europe? 

Switzerland and Greece are in some ways bookends to the European financial crisis, and together they tell us a great deal about the difficulties faced by the eurozone. It was only about 3 1/2 years ago that Switzerland capped the franc as a response to a huge inflow of capital from investors looking for a safe haven from sovereign debt crises across Europe. The value of the Swiss currency was rising dramatically, damaging Swiss exporters and threatening to throw Switzerland into an extended period of deflation. The “peg” was a way to stop that rise, and for a time it worked. 

Although Switzerland did experience some mild deflation, the consensus is that the Swiss economy fared better than it would have without the cap. So why then did the Swiss unexpectedly scrap the peg a few weeks ago? 

Well, defending a currency peg can be expensive. To keep the Swiss franc from rising above its target, the Swiss National Bank had to sell Swiss francs and buy euros. That’s an even trade so long as the relative values of the currencies don’t change. But it seems clear now that the Swiss wanted to act in advance of the widely anticipated announcement made on Jan. 22 that the European Central Bank (ECB) would begin buying 60 billion euros per month of eurozone bonds to bring down interest rates. 

Having already lost money on their euro holdings, the Swiss calculated that an ECB quantitative easing program was sure to put further downward pressure on the euro (and it has), creating even further losses in their euro portfolio. 

As Thomas Jordan, chairman of the Swiss National Bank’s governing board, remarked, “It is better to do it now than in six or 12 months when it would hurt more.”

Greece finds itself at the other end of the spectrum. Although a European Union member, it has been unable to exercise the fiscal discipline necessary to avoid running up unsustainable debt levels. 

To secure a bailout, the Greeks agreed to significant austerity measures. 

Now they are in a difficult spot. The hardships to average Greek citizens have made austerity politically unsustainable. 

But without a bailout, Greece may default on its debt, which could be even more devastating. As a result, it is increasingly likely that, as former Federal Reserve Chair Alan Greenspan has predicted, Greece will leave the EU,possibly evenbe forced out of it.

The eurozone is in a very precarious position at the moment. Stronger countries are finding it increasingly difficult to tie their futures to a European Union that has no authority to impose financial order on its members. Weaker countries, with their economies already floundering, are struggling to generate the political support at home to make needed changes. 

In the near term, the U.S. is impacted by slack demand from many of our major European trading partners, and a soaring U.S. dollar that is damaging our ability to export key commodities and other goods (which is a particular burden for Iowans). 

In the longer term, the eurozone’s troubles are a reminder that the global economy cannot recover on the strength of the U.S. alone.

The views expressed are those of the author as of the date of the article, are for informational purposes only, not meant as investment advice, and are subject to change. Miles Capital does not guarantee the accuracy or completeness of any statements contained in this material and is not obligated to provide updates.