Institutional agreement: the Swiss version of “remain or leave”

The European Union urges Switzerland to sign an institutional agreement to secure the future of bilateral relations between Bern and Brussels. However, the project risks failure due to Swiss domestic politics. What’s at stake?

Although Switzerland is not a member of the European Union (EU), it is integrated into the European Economic Area through bilateral agreements. The EU would like the institutional issues of this bilateral path to be settled in a framework agreement.

Between 2014 and 2018, Switzerland and the EU negotiated a text. Brussels pressured for a signature to be reached, but the Swiss government first organized consultations, which revealed three controversial points of the agreement:

• Wage protection: As wages and the cost of living in Switzerland are higher than the European average, trade unions and the Swiss industry fear wage dumping.

• State aid: the EU does not want state subsidies. The Swiss cantons fear that their banks will no longer be able to operate with state guarantees.

• EU Citizenship Directive: European citizens in the Confederation would have the same right to social assistance as the Swiss. Opponents in Switzerland fear “immigration to social assistance”.

Under pressure from domestic politics, the Federal Council tried to renegotiate these three points. The EU signaled a willingness to provide “clarifications”, but categorically ruled out new negotiations. The situation has been stalled for months.

Julie Cantalou, a political scientist and president of the GLP Lab, the laboratory of ideas of the Liberal Green Party, argues that there was a lack of political leadership from the Federal Council after the conclusion of the negotiations. The governing parties, she says, were divided and did not want to face the trial by fire of a referendum campaign. “Furthermore, Brexit and other crises in Europe have reduced Switzerland’s room for maneuver.”

A look back

Yet, relations between the EU and Switzerland had started well: full of optimism, in 1992 the Federal Council submitted an application for EU membership in Brussels. From his point of view, Switzerland was on the home straight and ready to enter the European Economic Area (EEA), seen as the first step towards full membership of the Union.

But things turned out differently: in the same year, the Swiss electorate surprisingly rejected membership of the EEA.

The government subsequently abandoned its EU membership project, preferring to define relations with Brussels through bilateral agreements.

The “bilateral approach” has proved its worth in the eyes of most Swiss people and EU membership is no longer topical.

In 2014, good relations were shaken by the “yes” of the Swiss people to a popular initiative to restrict immigration, although bilateral agreements guaranteed the free movement of people with the EU since 2002. Foreign ministers Germany and Austria publicly accused Switzerland of cherry-picking.

Parliament later watered down the initiative considerably, and in 2020 the electorate refused to end the free movement of people. The way was clear again for an institutional agreement.

And now?

Now Switzerland is back to square one. The framework agreement risks failure due to internal political resistance. The EU has made it clear that without a framework agreement, existing treaties will not be updated and no new agreements will be concluded.

“I compare the institutional agreement to updating the operating system of a smartphone,” explains Julie Cantalou. “You can do without the update, but then you can’t install new apps and over time the old ones don’t work anymore.”

In other words, Switzerland could move from the status of a “passive member of the EU” to that of a third country. Unless the EU and Switzerland reorganize their relations. Everything is still open.

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