VIENNA (Reuters) - Switzerland cannot allow its currency to remain at its current heady levels against the euro over the longer term because it will be too damaging for the Swiss economy, Austria's finance minister was quoted on Sunday as saying.
The Swiss National Bank (SNB) jolted global financial markets this month when it removed its cap on the Swiss franc, leading the currency to gain as much as 40 percent against the euro. (EURCHF=EBS)
Franc loans have been popular in parts of central and eastern Europe because of their low interest rates and the Swiss currency's sharp appreciation has given a headache to borrowers in countries from Poland to Croatia.
Wealthy Austria, which banned many foreign currency loans in 2008, has been less affected by the Swiss currency move. But the removal of the cap means more costly debt servicing for some 151,000 households who hold a total 29 billion euros ($32.5 billion) in Swiss franc-denominated loans.
"For Austrians who have loans in francs this means they have around 20 to 25 percent more debt," the Oesterreich newspaper quoted Finance Minister Hans Joerg Schelling as saying.
"I don't think that the franc will stay this high in the long term because Switzerland can't afford it. Exports get too expensive and tourism will drop," Schelling said.
He did not say how he expected Switzerland to rein in its currency.
Austrians and municipalities such as Vienna with Swiss franc loans would have been "well advised" to get out of them earlier and should learn for the future, Schelling said.
The franc, which stood at 1.20 to the euro before the SNB removed the cap, closed at 0.987 on Friday.
($1 = 0.8924 euros)
(Reporting by Shadia Nasralla; Editing by Gareth Jones)