VIEWS FROM THE CAPITALS

Summer 2008

by René Schwok

Switzerland is already a world champion at holding referendums on Europe and now voters face the prospect of another cliff-hanger contest in 2009. This time it will be about the free movement of people from the European Union’s newest members, Bulgaria and Romania.

Berne decided to extend free entry to both countries’ nationals when they joined the EU at the start of last year. But the isolationist Swiss People’s Party (SPP) wants to block the change. The right-wing party has been emboldened by winning nearly 30% of the vote in the last elections to the legislature, and will easily rustle up the 50,000 signatures needed for a plebiscite.

The main protagonists’ arguments are familiar, having been well rehearsed during referendums in 2005 and 2006. Those votes were about free entry for workers from the central and eastern European countries that joined the EU in 2004, plus a modest financial contribution towards European cohesion.

It is pretty well guaranteed this time around that the isolationists will invoke images of Switzerland being swamped by an invading horde of undesirables. Their rhetoric will probably degenerate into pure xenophobia and they also seem bound to stir up anti-Roma sentiment, dishonestly tarring all Romanians with the same brush.

In the opposing corner, a broad coalition will favour upholding Switzerland's international commitments and its tradition of openness. This camp will include parties from both the right and left of the political spectrum, plus bosses and trades unionists, intellectuals and journalists. Their main argument will be to remind voters that, if they vote against the free movement of labour, the EU would be perfectly within its legal rights to rescind bilateral agreements with Switzerland. Then the country's entire European policy would crumble.

The result of the vote is hard to predict. On the strength of previous outcomes, the pro-Europeans could be expected to win with a majority of around 55%. But there is a significant new factor that could upset this forecast. SPP leader Christoph Blocher was evicted from the Federal Council in December 2007, and has decided to make his former colleagues pay dearly for this humiliation. In 2005 and 2006 he refrained from adopting a clear stance, but this time around Blocher will not be inclined to hold back. Can he get 50% support in 2009? It seems there maybe a cliff-hanger referendum in prospect.

All this interest in Europe may seem odd to outsiders, given that the Swiss are generally regarded as uninterested in the topic of integration. But appearances are deceptive. The Swiss are fascinated by the “European question” and there is plenty of lively debate – albeit focussed on a peculiarly Swiss agenda.

Berne’s suggestion of a free trade area in farm products is one item currently on this agenda. Some 50 years after the launch of the EU’s common agricultural policy and its open market, Berne wants to open up its own farm trade on its own terms. There would be no single external tariff, no common agricultural policy and no harmonisation of agricultural subsidies.

Unfortunately for the government, there appears to be no support for their plan from most Swiss agricultural lobby groups either. They are already agitating against the idea and threatening Swiss voters with yet another referendum. Brussels, too, seems to be unenthusiastic about a scheme that would allow higher subsidies for Swiss farmers than for those in the EU.

Also rather belatedly, Switzerland is finally adopting the “Cassis de Dijon” principle, which was applied in the EU nearly 30 years ago after a judgment in the European Court of Justice in Luxembourg. It means that Switzerland will accept any products that are already traded freely in the EU, in accordance with the principle of reciprocal recognition of standards. Berne’s aim is to bring down Switzerland’s notoriously high domestic prices by increasing competition. Plainly, Brussels has nothing to lose from a unilateral Swiss decision which will make it easier to export merchandise to Switzerland.

Some spectres never seem to fade away, however, and the subject of Swiss banking secrecy still hangs over relations between Switzerland and her neighbours. When Berlin began to investigate tax-evading German bank accounts hidden offshore in Liechtenstein, the Swiss “auto-immune” response instantly kicked in. The chairman of the venerable Swiss Bankers' Association compared German actions to those of the Gestapo and Swiss magazines predicted catastrophic scenarios and relentless EU pressure to change secrecy rules. Things only calmed down after Luxembourg’s prime minister Jean-Claude Junker reminded everyone that EU decisions on taxation have to be unanimous. From now on, Switzerland will be relying on Luxembourg’s veto to protect the 2005 agreement on income tax and savings.

The subject of corporate tax is also still a bone of contention. The EU will no longer tolerate certain Swiss cantons offering foreign companies lower tax rates than those applied to Swiss ones. The European Commission considers this practice to be “perverse discrimination” that runs counter to the 1972 Free Trade Agreement between the EU and Switzerland, while Berne rejects any such interpretation. Only a gradual reduction in the taxation of Swiss companies, and attendant increases for foreign companies, can end the stand-off. And only unilateral action by Switzerland will end the pressure from the Commission, without giving the impression that the Swiss caved in to Brussels.