EU Urges Swiss To Consider More Bilateral Agreements

Ulrika Lomas, Tax-news.com, Brussels

07 March 2001

Who could really say they were surprised at the outcome of the 'Yes to Europe' referendum in Switzerland last weekend?

The overwhelming majority vote which virtually laughed in the face of the pro-European campaigners was definitely no surprise to Switzerland's private banking industry. Jean-Francois Mercier from Citibank told the Swiss media this week: 'This initiative was stillborn, odds now appear stacked against Switzerland joining the EU - and the euro - during this decade.'

The general opinion of the industry is that the referendum was called too close to the bilateral accords agreed last May between the EU and Switzerland. It was likely a case of too much contact with the EU and too soon, given Switzerland's phobia of large multilateral organisations.

Marcel Ospel Head of UBS, Switzerland's largest bank, said the bilateral agreements should be ratified with a 'wait and see' clause to view how they well they work before Switzerland enters into more talks with the EU, saying: 'They should now be ratified [by the EU’s member states] and then these agreements need to be implemented. This process should not be disturbed. We have to be pragmatic.' In fact, nearly a year after they were approved in a referendum, only five out of the fifteen EU member states have ratified the seven agreements.

In its dissection of 'what went wrong', the general opinion of the Swiss media is that Swiss voters believe they did enough when they voted for the bilateral accords last year and they feel that the disadvantages of joining the EU far outweigh the benefits. The Swiss economy is much stronger than many of its European counterparts with inflation lower than the European average, as is unemployment, income tax and VAT.

Compounding these issues is the status of the euro which is in a very weak position when compared to the Swiss franc: 'As long as the euro is a weak currency, the attractiveness of the Swiss franc is enhanced both to Swiss and foreign investors,' said Jean-Francois Mercier.

Senior economist at Credit Suisse, Fritz Stahel, adds to the explanation by saying that the Swiss view the bilaterals as an economic issue whereas the issue of joining the EU clashes with Switzerland's traditional political identity. He said: 'The bilaterals are a useful step-by-step approach to economic integration. But the question of joining the EU is a political one which raises issues of protecting Switzerland’s direct democracy, neutrality and federal system, and Swiss voters aren’t ready to take this step yet.'

Economist at UBS Warburg, Andreas Huffert, added: 'It was very likely this outcome - everyone in Europe knew about it. The EU is treating the vote as a referendum on the timing of Swiss membership, rather than a rejection of the EU itself.'

Indeed, the EU has promptly indicated that it is willing to enter into negotiations with Switzerland concerning more bilateral agreements. Immediately after Switzerland's resounding 'No' vote result, a letter was sent to the Swiss government by Sweden's Prime Minister, Göran Persson, urging Switzerland to discuss the Schengen Agreement which deals with the free movement of people in the EU and the Dublin Convention on asylum seekers and immigration.

The letter from the Swedish government, which currently holds the EU presidency, said that the EU and Switzerland had a mutual interest in widening their relations. The letter noted: 'The Union is prepared to examine these and related issues each on its merits in order to see how cooperation with Switzerland can be increased in a mutually satisfactory way.'

Switzerland's President, Moritz Leuenberger, described the letter as a 'breakthrough' in setting up talks on on new bilateral agreements to complement the seven agreements already established by Switzerland and the EU, which govern mainly trade issues. Mr Leuenberger is no doubt remembering last month's letter from the EU's foreign affairs commissioner, Chris Patten, which hinted that Switzerland would have to concede on the issues of customs fraud, savings taxation and banking secrecy before the EU agreed to negotiations on new bilateral agreements.

Switzerland has said it will discuss the issues, with the exception of banking secrecy which is non-negotiable, but one can't help wondering at the EU's timing. The majority of Swiss voters, clearly, are not pro-EU at the moment - will they really relish the prospect of voting on yet more bilateral accords while their sacred banking secrecy remains under threat?

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