French Towns Suffer as the Swiss Franc Soars

Saint Cast, a sleepy French coastal town in Brittany with 19th-century mansions and a mile-long white, sandy beach, restructured €3.6 million ($5.1 million) of debt in July 2007. The lender, a unit of Belgian bank Dexia, offered what seemed like a good deal: an interest rate of 3.99 percent—as long as the value of the Swiss franc, then trading at 1.6 to the euro, did not rise above 1.44.

It turned out to be a bad bet. As worries about the European debt crisis sent the Swiss franc climbing against the euro, Saint Cast’s interest rate has jumped to 15.25 percent. “There is something abnormal for a little pensioners’ seaside town to be embroiled in a European sovereign debt crisis and for my taxpayers to worry about the currency market,” says Jean Fernandez, 71, a former math teacher who serves as the town’s mayor.