A Swiss crevasse for EU relations

Published in Business Spectator (Melbourne), 20 February 2014

No, it was not a good start to the year for the European Union by any account. The French President had to spend more time sorting out his own private affairs than his country’s ailing economy, Italy managed to kick out the third Prime Minister in as many years, and the German Constitutional Court effectively killed the European Central Bank’s main policy to save the Euro.

All of these developments were less than helpful for moving the continent into calmer political and economic waters. But then came another full frontal blow to the EU, this time not delivered by a politician or a court, but by a people. In Switzerland, a 50.3 percent majority voted in a referendum to limit the number of migrants the country would accept – including those from the EU.

From an Australian perspective, it is hard to imagine that a country wishing to keep control over its borders would be seen as unusual or revolutionary. In the European context, however, the Swiss vote signifies a radical departure from the EU’s common market policy with its guaranteed free movement of goods, services, capital and people.

Though not a member of the EU, Switzerland has signed treaties with the EU to link it to the common market. It is a first for a country to withdraw from it, and therefore the Swiss case is watched carefully in other European capitals and, of course, in the EU’s headquarters in Brussels.

For the EU the Swiss vote is annoying and concerning on a number of fronts. The freedom to trade and move across borders is probably the EU’s greatest achievement. It is also the core of what the European project of political and economic integration is all about. Question the free movement of people across the countries of the EU and associated countries like Switzerland, and you question the entire construction of the EU.

However, there is an even greater concern for Brussels. Though they may not be happy about the Swiss vote, they could probably live with a Switzerland that cuts itself loose from the EU. What is far more worrying is the precedent that such a Swiss departure from the common market would set.

It is not unlikely that other countries would vote just like Switzerland to restrict immigration if they were asked. The Swiss are by no means an unusually xenophobic, let alone racist nation. They just like to retain this bit of their sovereignty to manage the immigration process. This is not too difficult to understand given that the share of foreign migrants in Switzerland’s population is about a quarter.

Despite this high migrant share there are none of the tensions between migrants and the domestic-born population that can be seen in other European countries. The Swiss’ main concern about the level of migration concerns the perceived inability of infrastructure to cope with rapid population increases.

However, the actual policy question of migration is just part of the reason why the Swiss voted the way they did. The result has as much to do with a general unease about the EU, and the referendum made it possible to express this.

For many years, Switzerland has felt bullied by its European neighbours and by the EU. As a non-member of the EU but a country closely linked to the union, the Swiss had to comply with many EU rules and regulations without having an influence on them. In effect, the Swiss were told to accept what the EU asked of them if they wanted to remain able to trade with its European neighbours.

Nowhere was this forced compliance more visible than in the fight against tax evasion. Together with the US government, the EU forced Swiss banks to cooperate to a point that they now routinely ask their international clients to provide evidence on the tax status of their deposits. Former German finance minister Peer Steinbrück famously threatened to send the cavalry to Zurich if the Swiss did not make their banks more transparent. Such undiplomatic statements rather than the actual issue itself irritated the Swiss. They are a small but proud nation that does not like to be told what to do, least of all by their bigger neighbours to the North.

The referendum on migration caps was also a way of sending a message to the EU that the Swiss are no longer willing to give in to any and all of the EU’s demands. In this sense, it was an anti-EU protest vote rather than a vote on immigration policy.

If it needed any confirmation to show that the Swiss had a point, the European reactions to their referendum delivered it. Instead of trying to understand why the Swiss had voted the way they did, some European politicians already started to think of ways to retaliate by cutting it off some European markets to which the Swiss want access.

Perhaps one reason why the EU is watching so nervously what happens in tiny Switzerland is the signal that it sends out. This year is the year of the elections to the European Parliament, and according to opinion polls in a number of countries euro-sceptical parties can expect substantial gains. Parties like the United Kingdom Independence Party (UKIP), France’s Front National or the German Alternative für Deutschland can all feel encouraged by the Swiss vote. Nigel Farage, the leader of UKIP, could hardly curb his excitement about the “great result” and called it “victory for common sense.”

For the EU and its pro-integration agenda, the Swiss referendum may turn out to be a taste of more popular protest to come. If Switzerland after renegotiations regarding its relationship with the EU ends limitless migration for EU citizens, other countries may follow suit, probably beginning with the UK.

The EU always had a strange relationship with democracy, not least because it does not always generate the results EU officials would like to see. The Swiss referendum is a case in point.

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