So the European Union has a deal on the table, a nation still has to agree on it and then pass it through parliament. No, this is not the United Kingdom, its intractable talks and extendable deadlines where a deal must be passed by sometime. No, this is Switzerland, and with a deadline of June 30.
For more than four years, Brussels and Bern have been trying to thrash out the terms and conditions of the EU-Switzerland framework agreement. Negotiations are certainly less chaotic than those with the government of Prime Minister Theresa May — both sides do know what they want — but unlike with the Brits, there hasn’t yet been a breakthrough.
Switzerland isn’t a member of the European Union and is landlocked by nations that belong in the bloc.
Not surprisingly, the European Union is Switzerland’s largest trading partner and, given its unique geographical position at the very centre of the continent of Europe, has a unique position that speaks to its historic, cultural, linguistic, economic and financial ties with the nations that border it — Austria, Germany, France and Italy.
Both sides have long agreed on a June 30 deadline to come with up a new agreement that oversees the entire relationship between the bloc and the Swiss.
Switzerland is a member of the European Economic Area — the continent-wide customs union that includes the 28 members of the European Union along with Norway, Iceland, Lichtenstein.
While recent history and the Brexit case have shown that EU deadlines are malleable, both Brussels and Bern are determined to conclude the agreement by that June 30 deadline. The new European Parliament takes up office after that. Failure to reach a deal could send shock waves through Switzerland that go far beyond a diplomatic deep freeze.
Unwilling to budge
At a meeting in the Belgian capital on Tuesday, the EU Commission — the cabinet-like body responsible for the day-to-day running of the bloc — refused to extend the Swiss stock exchange’s direct access to EU markets after that June 30 deadline, sending a signal that Brussels is unwilling to budge.
Under one current agreement, the Swiss bourse has access to EU bourses for trading under an “equivalency” clause, expiring at the end of the month. The Swiss have been long protective of their financial sector and, by signalling an end to equivalency, Brussels is making a very significant point.
The whole point of the EU-Swiss framework agreement is to replace and streamline more than 120 bilateral accords that have been signed as the European Union grew and evolved into the bureaucratic behemoth it is now.
There is a general consensus on what the final framework should look like, but the Swiss have said they want more time to consult their nationals and hold public consultations.
Does the term cherry-picking ring a bell? Picking and choosing the best of the deal on offer? Bern said earlier this month that it is willing to sign the agreement points on wage and worker protection, but that state subsidies and citizen’s right clauses will need to be explored further.
The government in Bern is obligated to pass the agreement through parliament and then hold a national referendum on it too — but the right in Switzerland are making noises about the deal, about alignment with the European Union, and for the need for the mountainous nation to uphold its long-standing neutrality and independence.
Financial flows
Not surprisingly, given the backdrop of the Brexit talks, the Commission has been unwilling to show little flexibility to end the stalemate, but it did extend the equivalency deal by six months last December.
The Swiss government is preparing countermeasures designed to bring trading of Swiss stocks back to Switzerland from EU bourses. It would ban EU exchanges from hosting trading of Swiss stocks, exposing EU bourse officials to punitive measures if they did not comply.
The tit-for-tat escalation could disrupt financial flows, making it harder to launch initial public offerings of shares in Switzerland given the absence of demand from the EU.
If this is a power play, then consider that the framework agreement would also create an electricity union with the European Union, fostering cross-border flows and ensuring power supplies to the Swiss in emergencies. No deal means no power agreement.
Failure to reach an agreement would also mean that the Swiss are on the sidelines when it comes to the European Union building a single continent-wide digital market, one that would eliminate regulatory and system barriers for both businesses and consumers.
It’s one thing to live in a neutral and independent nation surrounded by mountains, another to be shut out of a huge digital marketplace that is evolving and standardised beyond those Swiss borders. That would be a classic case of the Swiss having to choose between traditional values and the value of technology.
In a bigger sense, the way in which Europe and the world is now becoming more interlinked, more dependent on global trade, on the movement of goods, services and indeed people, is all posing an existential question to the Swiss.
