(Reuters) - The debt crisis shows that Switzerland was right to stay out of the European Union, but it is not immune to the problems in the single-currency bloc, Switzerland's former justice minister and mastermind of the populist Swiss People's Party (SVP) said.
Polls show the right-wing SVP, which has campaigned provocatively against immigration describing foreigners as "black sheep," is on course to remain Switzerland's largest party in an election on October 23.
"We're seeing a great advantage of not being in the euro zone and the EU," Christoph Blocher, SVP vice-president, told Reuters on the sidelines of a campaign event.
"You see that in the state of Switzerland. The better economic situation is due to that," he said, adding this proved wrong supporters of Swiss membership of the EU who had said the country would suffer after it rejected joining 20 years ago.
"Small states work better because they are manageable. That way you can solve problems more easily," he said.
Blocher, who is standing for seats in both the lower and upper houses of parliament, is credited with transforming the SVP from a small rural party into Switzerland's biggest political force by campaigning against immigration and EU membership.
The SVP won 29 percent of the vote in 2007 after running provocative posters depicting foreigners as black sheep being kicked out of Switzerland. It has won referendums to expel criminal foreigners and stop the building of mosque minarets.
New figures out this week showed foreigners now make up 22.3 percent of the Swiss population of some 7.7 million, with a big jump in migrant workers in the last year from EU countries -- particularly Germany, Portugal and France.
Even though Swiss unemployment remains low by international standards at about 3 percent, Blocher said a deteriorating situation in the euro bloc and elsewhere could lead to rising joblessness due to freedom of movement of workers from the EU.
"Of course Switzerland is dependent on other countries. Even if we're not a member," he said. "If there is a crisis then Switzerland will also be hit."
Fiercely proud of its neutrality and independence at the heart of the continent, Switzerland narrowly rejected joining the European Economic Area in 1992 after a campaign led by Blocher but has since brokered bilateral deals with the EU.
At the Blocher campaign event in a Zurich hotel, party workers gathered signatures for a new SVP referendum entitled "Stop mass immigration" that seeks to set annual quotas for foreigners even though that could go against EU obligations.
Polls see support for the SVP holding steady as the party has plastered the country with posters showing black feet marching on the red and white Swiss flag.
A poll released on Wednesday predicted it would win 29.3 percent at this month's election, almost exactly the same as its breakthrough performance in 2007.
CURRENCY CAP WORKING
While the SVP has sought to keep the campaign focussed on immigration, voters have also expressed increasing concern about the strong Swiss franc, which has soared this year as investors have sought a safe haven from economic turmoil elsewhere.
That prompted Blocher to reverse his previous opposition to interventions to weaken the currency by the Swiss National Bank, which last month shocked markets by introducing a cap of 1.20 francs to the euro to try to protect flagging exports.
Blocher, who was ousted from Switzerland's coalition government in 2007, said he hoped the franc cap would work as similar Swiss currency pegs had done in 1936 and 1978.
"Back then we set a limit and afterwards the currency levelled off at the market value of its own accord," he said.
Although many still regard the franc as overvalued, with industry groups calling for the SNB to shift the cap to 1.25 or 1.30 per euro, Blocher, a billionaire former industrialist, said businesses would have to learn to live with the strong currency.
"I'm an exporter and if you asked me whether it should go to 1.50, of course I'd say that would be nice, but it's not in the interests of the population," he said.
"The hard currency has also challenged the economy and made it strong. It was always a fitness test. We have to strive to be more productive, more cost-competitive and innovative."
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