EU preparing to downgrade Switzerland's single market access as warning to Brexit Britain

Jon Stone

The EU is preparing to cut Switzerland's stock exchanges off from the single market, in part as a warning shot to Brexit Britain that it must play ball.

Like the UK, Switzerland is renegotiating its relationship with the European Union – and a lack of progress on the Swiss side in implementing a new treaty has frustrated Brussels.

With Brexit talks in the background, EU officials want to show they are serious about the integrity of the single market.

“We simply cannot accept further attempts of foot-dragging and watering down internal market rules, especially in what is probably the decisive phase regarding Brexit,” Johannes Hahn, the EU Commission in charge of neighbourhood policy said in a letter reported by the Bloomberg news agency.

The EU currently grants Switzerland "regulatory equivalence" in the financial sector, which allows firms to trade shares on the country's stock exchange.

The EU recognition would automatically expire on 30 June if the Commission does not decide to extend it - potentially damaging Swiss stock exchanges to the benefit of other European ones.

Since 2014, Switzerland and the EU have been trying to formalise their relations into a single agreement. The two powers' relationship is currently covered by around 120 separate and bespoke bilateral treaties.

A draft treaty was concluded in November 2018, but the Swiss government has been demanding further clarifications before it signs of the agreement - on the issues of maintaining the current level of workers and wage protection, state subsidies, and citizens' rights.

The treaty may end up being put to a national referendum in Switzerland, as is common there - its rejection would likely damage the EU-Swiss relationship.

The situation in the Alpine nation situation somewhat mirrors that in the UK, where Theresa May negotiated a withdrawal agreement with the EU but has not been able to ratify it.