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The EU’s Next Big Problem Is Switzerland

Europe is facing its first post-Brexit test of how tough it should be with its close neighbors.

By Caroline de Gruyter, a Europe correspondent for the Dutch newspaper NRC Handelsblad and a columnist at Foreign Policy.
Swiss electoral posters demand end of freedom of movement agreement.
Electoral posters saying ”Too much is too much!” and ”Protecting the jobs of local workers now” advertise a Swiss People’s Party initiative demanding the government scrap its freedom of movement agreement with the EU in Lausanne, Switzerland. FABRICE COFFRINI/AFP via Getty Images

One Sunday, not long after he moved to Bern, Switzerland, Michael Flügger, the German ambassador to Switzerland, walked from his residence to a bakery. On the street, he saw a far-right campaign poster showing a man wearing a European Union flag as a belt sitting on a tiny depiction of Switzerland, crushing it under his weight.

“I was shocked,” Flügger recently told a Swiss newspaper. During a previous posting in Geneva, he had never encountered such animosity toward the EU, Switzerland’s main trading—and often like-minded—partner. But now, “the atmosphere about the EU has become so negative,” he said. “In some media and social networks, it is depicted as a monster.”

This growing animosity serves as the backdrop for Swiss President Guy Parmelin’s first official visit to Brussels on Friday for an important meeting with European Commission President Ursula von der Leyen. With Switzerland unable to implement a new institutional agreement with the EU, relations between the two have reached a dead end.

This will be the ultimate stress test for the bilateral relationship between these two neighbors—and, after Brexit, an indication of how tough the EU wants to be with nearby countries. At least Parmelin assured his fellow countrymen he “was not going to do a Boris Johnson” and slam doors behind him.

The comparison with Brexit looms over the fraught relationship, but it isn’t entirely apt: While the United Kingdom is distancing itself from the EU, Switzerland is getting closer to it. Switzerland, not a member of the EU, is eager to expand its extensive relations with the 27 member countries. The problem is, like the U.K., it wants to keep sovereignty at the same time. This circle is difficult to square. Brussels does not tolerate what it calls “cherry-picking” rights claims without the acceptance of obligations: It cannot give nonmembers privileges that even members do not have. With the world in turmoil, however, the EU does have a great interest in maintaining a good relationship with like-minded countries like Switzerland for a variety of reasons.

In a 1992 referendum, the Swiss rejected EU membership. They negotiated a trade agreement with Brussels soon afterward and built on this ever since, with gusto: They currently have at least 120 bilateral agreements that function well. These secure market access for Swiss pharmaceuticals, metals, and chemicals in exchange for Swiss adherence to internal market rules and a modest financial contribution to poor EU regions. Switzerland is a member of the Schengen Area in which there are no border controls. It participates in Erasmus student exchanges, in EU scientific research, and in police cooperation. Access to the EU health system and electricity market are high on the Swiss wish list.

Some say Switzerland has the best of two worlds: access to the largest single market in the world and freedom to play the sovereignty card whenever it wants.

According to a 2019 study, no country profits more from the EU single market than Switzerland: Although its added value to the average EU citizen is $1,008 extra per year, the average Swiss gets $3,499. In Swiss border regions close to Basel or Geneva, tens of thousands of citizens commute to work on the other side of the border. Hospitals, restaurants and other businesses rely on this. Switzerland, some argue, has a kind of “passive EU membership.”

In Brussels, however, the Swiss are known as difficult customers. While Norway, another nonmember with extensive market access, never questions its financial contribution to the EU, Switzerland regularly withholds it to get its way on some issue. Swiss referendums are also a source of friction. The popular vote for an immigration quota in 2014, for example, violated bilateral agreements with the EU to safeguard the free movement of people.

The 2014 referendum was the last straw for the EU. It realized how difficult it was to manage the bilateral agreements. They constantly need to be renewed or updated like an iPhone that otherwise can’t handle new apps. This means permanent negotiations between the two sides. Moreover, if one of the parties cancels or violates one bilateral agreement, others automatically collapse too. That is why, after the 2014 immigration quota referendum, Bern and Brussels began negotiating a new institutional framework to encapsulate and stabilize all existing agreements and reduce political tensions while providing room for future agreements. In 2018, they agreed on a text.

Today, the 27 EU member states still support this text—but on the Swiss side, there is trouble. In 2018, the Swiss government asked for some time to consult political parties, social partners, and its citizens. These groups started criticizing the draft and demanding changes. This went on for more than two years. Remarkably, the Swiss government never defended the text.

It formulated three additional demands instead, which the EU finds impossible to satisfy. Bern wants exceptions on EU state aid rules, exceptions on social benefits for EU citizens (which Swiss in the EU will also get), and special labor law restrictions that would make EU companies operating in Switzerland less competitive against Swiss companies. All three demands involve exceptions for Switzerland that EU countries themselves would never be granted.

This is where the Brexit parallel comes in. Last year, when London also tried to secure maximum EU market access against minimum adherence to the rules, the 27 member states refused. They wanted to preserve the single market. They also wanted to set an example for other nonmember countries who would otherwise demand the same thing. Because of Brexit, the EU has become less flexible. This now deprives Switzerland to get the tailor-made arrangement it feels entitled to.

As soon as the withdrawal agreement between the EU and the U.K. was concluded in December 2020, the Swiss combed the text. They found two things that made them jealous. The first is the European Court of Justice—or “foreign judges”—gets no direct role in disputes between London and Brussels. The second is the British don’t have to “dynamically” follow European rules like Switzerland does. Within days, Swiss politicians and citizens were urging their government to go to Brussels, Brexit deal in hand, and get those two things too. Some even thanked the U.K. for “helping the dwarf beyond the seven mountains.”

The EU has tried to explain that Switzerland can’t have them because its relationship with the EU is much closer than the British one. Disputes with Switzerland, for instance, almost always involve market issues. The only court capable of dealing with EU market issues is the European Court of Justice in Luxembourg. But many Swiss are not convinced. In this sense, Brexit has definitely made the EU-Swiss relationship more difficult to manage. The Swiss even have a word for it: “Brexit-envy.”

For many months, Swiss talk shows have mostly been about two things: COVID-19 measures and its framework agreement with the EU. For many Swiss, the government’s reticence about the agreement means it is probably not worth defending. The Swiss government is divided. According to media reports, ministers can’t even agree on the message Parmelin should take to Brussels: whether Switzerland should ditch the new agreement or try renegotiation. There is no plan B. Former Swiss President Micheline Calmy-Rey recently said: “The Brexit deal shows politicians need to know what they want. Switzerland doesn’t know it. In that respect, we could learn something from Boris Johnson.”

Meanwhile, political entrepreneurs are having a field day. Billionaire Alfred Gantner started a movement against the framework agreement: Allianz Kompass/Europa, backed by companies, farmers, and even trade unions. He wants a “Brexit deal plus”—trade, and nothing else. The radical right Swiss People’s Party, of which Parmelin is a member, and entrepreneurs platform Autonomiesuisse are also against the agreement. The social democrats and liberals are split. Pro-EU groups have also sprung up. Suddenly, there is new political momentum in Switzerland. Party discipline evaporates, and debates become more interesting.

But although the dispute may reinvigorate national politics, some captains of industry finally started to sound the alarm this week. In several newspapers, they reminded their fellow citizens that substantial portions of Swiss wealth are earned in the European single market—and that Switzerland, almost a semi-member state, is obliged to follow more European rules than the United Kingdom. Philip Mosimann, CEO of Bucher Industries, accused the government of being “orientierungslos” or disoriented.

Meanwhile, a leaked report of a meeting between the European Commission and member state representatives in Brussels accused the Swiss government of sitting idly by while the debate goes off the rails. “There is no commitment from Switzerland. The commission cannot negotiate on its own,” Swiss television quoted from the report.

This is a deep crisis. Without the new framework agreement, existing bilateral agreements remain in force. But Brussels refuses to update them if Switzerland keeps stalling the new agreement. If the EU stands firm, Switzerland could already lose access for new medical devices to the EU in May. More sectors would get locked out progressively. Brussels has ruled out Swiss access to the EU’s electricity and health market as well.

Benjamin Franklin once warned against throwing “stones at your neighbors if your own windows are glass.” Both Parmelin and von der Leyen have nothing to gain from further escalation. But finding a way out will not be easy.

Caroline de Gruyter is a Europe correspondent and columnist for the Dutch newspaper NRC Handelsblad, as well as a columnist at Foreign Policy. She currently lives in Oslo, Norway.

Tags: EU, Europe