June 26, 2019 / 11:39 AM / in 5 months

Breakingviews - Switzerland can afford to gamble on EU referendum

An EU flag flies beside Switzerland's national flag near the German-Swiss border in Rheinfelden, Germany, March 11, 2019. REUTERS/Arnd WIegmann

MILAN (Reuters Breakingviews) - Switzerland can afford to gamble on its own European Union referendum. Fear of a popular backlash is preventing the Alpine nation from signing a deal to simplify EU relations and gain better market access. But Bern has little leverage over its biggest trading partner and polls suggest most voters are supportive. Besides, a “no” vote would not leave it much worse off.

Five years after kicking off talks, the government in Bern has failed to seal a framework agreement with the EU that would consolidate an existing maze of treaties regulating areas such as the free movement of people, transport and technical trade standards. Frustrated with Swiss foot-dragging and hardened by the chaotic Brexit talks with the UK, Brussels is poised to withdraw Swiss stock market equivalence next week, a move that would make it harder for investors to trade EU shares in Switzerland.

The economic argument for improving Switzerland’s relationship with its bigger neighbour is obvious. The EU already accounts for 60% of Swiss exports, and existing bilateral agreements cover goods worth 1 billion Swiss francs a day. These figures would grow if Switzerland was granted broader EU market access, for instance in financial services or the fledgling common electricity market.

Opponents to the deal say it will erode wages, limit state aid and weaken immigration controls. Under the Swiss direct democracy system, any accord is likely to be subject to a referendum. The government fears such concerns may tip the balance against the EU deal.

Yet, there is an apparent disconnect between the government’s fears and citizens’ thinking. An extensive opinion poll carried out by research institute gfs.bern in March showed 60% of those polled would support the deal. Among Swiss companies polled in May, support was 75%, higher than a year earlier. Recent votes have also gone in favour of Europe. In May, Swiss voters agreed by a two-to-one margin to tighter gun controls – a U-turn on the tradition of ex-soldiers keeping assault rifles – to maintain access to the Schengen open-border system.

Losing a referendum on the EU deal might be embarrassing for the government. But chances are it will go through. Also, unlike Britain, Switzerland has over 120 existing treaties to fall back on. While a “no” vote may forgo some opportunities, Bern won’t end up in a UK-style economic limbo.

Breakingviews

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