This update corrects the value of the abandoned peg of the Swiss franc to the euro.

WASHINGTON (MarketWatch) — The Swiss franc, it turns out, is not strong enough to stand in the way of the train wreck that is the euro.

The currency of the tiny Alpine nation has long occupied an anomalous safe-haven position in world currency markets, far out of proportion to the size of the Swiss economy.

But the limits of that economy reasserted themselves in dramatic fashion today.

“ It is not quite a perfect storm brewing for the second half of January — but it could become one. ”

In a move that shocked markets, the Swiss central bank abandoned its policy of defending a rate of 1.20 Swiss francs to the euro CHFEUR, -0.00 , resulting in a skyrocketing franc, a plunging euro, and world stock markets thrown in disarray.

The timing — a day after the advocate general for the European Court of Justice gave the green light for the European Central Bank to purchase European Union government bonds — made it clear that the Swiss move was in anticipation of the ECB finally launching its quantitative easing later this month.

Swiss Franc Moves Surprise Markets

It cannot have been an easy decision for the Swiss National Bank. A currency already overvalued in terms of purchasing power parity with its main trading partner has now become even more drastically overvalued.

This will increase the cost of Swiss exports and price Swiss vacations out of the reach of many.

But the alternative was to defend a euro caught in what increasingly looks like a deflationary spiral even as hot money was flowing into Switzerland to exploit the opportunity for a lucrative arbitrage against the euro.

The Swiss central bank justified the abandonment of its four-year-old peg to the euro with changed circumstances. As the euro has declined, the overvaluation of the Swiss franc on the whole has narrowed, it claimed, because other currencies have also risen against the joint EU currency.

“Recently, divergences between the monetary policies of the major currency areas have increased significantly — a trend that is likely to become even more pronounced,” SNB President Thomas Jordan said in a hastily called news conference this morning. “The euro EURUSD, -0.06% has depreciated substantially against the U.S. dollar and this, in turn, has caused the Swiss franc USDCHF, +0.34% to weaken against the U.S. dollar. In these circumstances, the SNB has concluded that enforcing and maintaining the minimum exchange rate for the Swiss franc against the euro is no longer justified.”

The trend is “likely to become even more pronounced,” of course, because the ECB is now almost sure to announce its QE program next Thursday.

The Swiss move has prompted analysts to speculate that the QE may be even bigger than market expectations — closer to 1 trillion euros rather than the 500 billion currently anticipated.

The first and only duty of the Swiss National Bank is to protect the Swiss economy and its currency. The fact that this decision has caught out a number of speculators and thrown global markets into turmoil is just so much collateral damage from that point of view.

But it has unleashed market forces that may take some unpredictable turns. It will for starters massively complicate the task of the ECB as it scrambles — much too late in the view of many analysts — to counter the deflationary forces at work in the EU.

The currency turmoil comes just as the political crisis in the eurozone reaches a new inflection point with the snap parliamentary elections in Greece this month. These could bring the leftist party Syriza to power on its platform of rejecting further austerity and renegotiating the country’s foreign debt.

In this context, even the resignation yesterday of Italian President Giorgio Napolitano takes on a new significance. While the need to get a consensus candidate elected as successor was seen as a test for Prime Minister Matteo Renzi, the new turmoil could narrow his margin for error even further.

It is not quite a perfect storm brewing for the second half of January — but it could become one.

It exposes the dangers of German Chancellor Angela Merkel’s deliberate policy of brinksmanship — pushing out difficult decisions in a pattern that always seems too little, too late but ends up being just enough.

Most of the time. Maybe not this time.