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EUROPEAN UNION

What you need to know about the new draft Swiss–EU deal

After four years of intense and occasionally bad-natured negotiations, Switzerland and the European Union have finally come up with a draft deal on future bilateral relations. But what is it all about? Why does it matter? And will the deal ever see the light of day?

What you need to know about the new draft Swiss–EU deal
File photo: Depositphotos

How did the draft deal come about?

The idea of a new framework agreement to streamline relations between the EU and Switzerland was first floated in the Swiss senate back in 2002 but the main impetus came from Brussels in 2008.

Bilateral relations between Switzerland and the EU are currently based on some 20 main agreements and around 100 secondary agreements negotiated by the two sides since Swiss voters rejected a proposal to join the European Economic Area back in 1992.

But a decade ago, Brussels pushed for new arrangements designed to ensure Switzerland applied EU law in a standardized manner. This desire partly arose in response to a long-running dispute over Swiss measures to protect its labour market.

Read also: Ten things you need to know about the Swiss political system

These measures include a provision which requires foreign-based firms that deploy foreign staff in Switzerland on a short-term basis to give eight days’ notice to Swiss authorities.

The idea behind this measure is to give Swiss authorities time to ensure that foreign firms are not undercutting local wages by bringing in cheaper foreign workers. But Brussels argued the measure contravened the free movement of persons treaty between Switzerland and the EU.

The then Swiss President Doris Leuthard and European Commission president Jean-Claude Juncker in November 2017. Photo: AFP

However, bilateral talks began in earnest in 2014 after the “against mass immigration” popular initiative was narrowly passed by Swiss voters in a referendum.

The initiative called for quotas on foreign nationals in Switzerland. It also demanded that the Swiss government renegotiate its treaty on free movement of persons within three years. If it failed to do so, the agreement would be revoked.

If the initiative had been implemented in full, it would have triggered the so-called guillotine clause imposed by the EU which states that if one treaty between Switzerland and the EU is not renewed or is terminated, the EU can render all other agreements invalid

Both sides rushed to try and salvage bilateral relations. In May 2014, negotiations began. Meanwhile, the Swiss government worked to limit the impact of the referendum, finally passing a much watered-down version of the initiative in 2016.

Negotiations between Switzerland the EU have been followed especially closely since the Brexit vote of 2016 with many observers suggesting they may provide insights into UK-European relations in the future.

What have these negotiations focused on?

Based on Swiss demands, talks towards a new framework deal have focused on just five agreements related to Swiss access to the EU market. These are the agreements on free movement of persons, air transport, transport of passengers and goods by rail and road, trade in agricultural goods, and mutual standards recognition.

Read also: 'The Swiss have a completely false view of me' – European Commission President

Much of the discussion has focused on how EU law should be adopted in Switzerland and on how disputes between the two parties should be settled.

What have been the main sticking points in the negotiations?

Both the traditionally pro-Europe Socialists and unions have drawn a line in the sand over the eight-day notice period for the posting of foreign workers. Meanwhile, the anti-EU SVP has argued Swiss sovereignty will be affected if Switzerland is forced to adopt EU law.

What are the key points of the new deal?

The 34-page document made public by the Swiss government on Friday (and still only available in French) calls for the so-called “dynamic adoption approach” for EU law in Switzerland. This would see bilateral agreements updated “as quickly as possible” in line with changes to EU legislation.

Switzerland would not be required to automatically adopt EU law. The Swiss parliament would have the right to choose whether to adopt legislation, as would the Swiss people (through referendums).

Under the deal, known as InstA, serious disputes would be settled by an independent arbitration panel. In cases where the dispute concerns EU law, arbitrators could ask for a ruling from the Court of Justice of the European Union. This ruling would then be binding. If Switzerland subsequently failed to implement a ruling of the court, the EU could take measures including suspending a bilateral agreement.

The Luxembourg-based Court of Justice of the European Union. Photo: AFP

When it comes to free movement of persons, the draft deal would give Switzerland three years to adopt EU rule changes dating from 2014 and 2018 on the posting of foreign workers.

Read also: Switzerland praises 'successful integration of qualified workers'

But the deal also sees the EU making concessions in this regard. Switzerland could continue to demand foreign-based firms give advance notice of the posting of foreign workers to Switzerland in at-risk sectors (such as construction). However, the current eight calendar day notice period would be reduced to four working days.

Critically, the new draft deal does not mention the Citizens' Rights Directive. This directive gives citizens of the European Economic Area (which includes the EU and Switzerland) and their families a wide range of rights in terms of freedom of movement and entitlement to welfare benefits.

Because the draft deal does not mention the directive, this means there is no exception for Switzerland. As a result, all disputes regarding the directive would be subject to formal dispute settlement procedures.

What is the current state of the draft deal?

The document is marked “final version” and the EU was pushing very hard for the Swiss government to approve it by last Friday, December 7th.

Brussels has tried to pile pressure on Bern by announcing it would remove the so-called 'equivalence' status of the Swiss stock exchange – granted temporarily for a 12-month period in late 2017 – unless Switzerland says yes to the new deal.

This stock market equivalence means EU-based trading platforms can buy and sell Swiss stocks. If Brussels withdraws it, the Swiss exchange could see trade volumes seriously reduced. Switzerland's international image as a financial hub would also be damaged.

The headquarters of the Swiss stock exchange in Zurich. Photo: AFP

But in a preemptive strike, the Swiss government in late November announced measures aimed at protecting its stock exchange if it lost that equivalence. The government then played for more time by making public the draft deal on December 7th and announcing a consultation process would now take place.

In a statement, the Federal Council said it “considers the current outcome of the negotiations to be largely in Switzerland's interests and in line with the negotiating mandate”.

But it stressed it had “decided not to initial the institutional agreement for the time being” because of “outstanding issues” including the Citizens' Rights Directive and measures designed to protect Swiss wages.

How has Brussels responded?

In a statement, the European Commission said it “respects the wish of the Federal Council to consult all stakeholders” before submitting the deal to the Swiss parliament for approval. But it called for a speedy approval of the draft treaty.

However, it may be that the Swiss have won the latest round of poker. On Tuesday, Reuters reported EU sources as saying Brussels would extend equivalence for the Swiss stock market for another six months, which would give Bern more time to negotiate, despite EU assertions the talks are now done and dusted.

An official statement on stock market equivalence is expected from the EU early next week.

So what happens next?

This is the big unknown. However, the general consensus in Switzerland is that the current deal is dead in the water because both left- and right-wing parties in the Swiss parliament will not approve it as it stands.

If, by some chance, the current deal were to be approved in its current form by Bern, that might not even be the last hurdle. This is because the deal could then also be subject to a referendum under Switzerland’s system of direct democracy.

In a more likely scenario where the EU extends Switzerland's stock market equivalence for another six months, the Swiss government would then have half a year to drum up consensus in the parliament or try and thrash out a revised deal and hope that Brussels is willing to come back to the negotiating table. 

But if the Swiss government can't find cross-party agreement, or if Brussels won't renegotiate a deal it already says is final, then relations could sour even further.

The EU could begin by withdrawing stock market equivalence or it could – as Swiss daily Le Temps noted in a recent editorial – target even more painful measures for Switzerland like its access to the internal EU electricity market.

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IMMIGRATION

How Europe’s population is changing and what the EU is doing about it

The populations of countries across Europe are changing, with some increasing whilst others are falling. Populations are also ageing meaning the EU is having to react to changing demographics.

How Europe's population is changing and what the EU is doing about it

After decades of growth, the population of the European Union decreased over the past two years mostly due to the hundreds of thousands of deaths caused by the Covid-19 pandemic.

The latest data from the EU statistical office Eurostat show that the EU population was 446.8 million on 1 January 2022, 172,000 fewer than the previous year. On 1 January 2020, the EU had a population of 447.3 million.

This trend is because, in 2020 and 2021 the two years marked by the crippling pandemic, there have been more deaths than births and the negative natural change has been more significant than the positive net migration.

But there are major differences across countries. For example, in numerical terms, Italy is the country where the population has decreased the most, while France has recorded the largest increase.

What is happening and how is the EU reacting?

In which countries is the population growing?

In 2021, there were almost 4.1 million births and 5.3 million deaths in the EU, so the natural change was negative by 1.2 million (more broadly, there were 113,000 more deaths in 2021 than in 2020 and 531,000 more deaths in 2020 than in 2019, while the number of births remained almost the same).

Net migration, the number of people arriving in the EU minus those leaving, was 1.1 million, not enough to compensate.

A population growth, however, was recorded in 17 countries. Nine (Belgium, Denmark, Ireland, France, Cyprus, Luxembourg, Malta, Netherlands and Sweden) had both a natural increase and positive net migration.

READ ALSO: IN NUMBERS: Five things to know about Germany’s foreign population

In eight EU countries (the Czech Republic, Germany, Estonia, Spain, Lithuania, Austria, Portugal and Finland), the population increased because of positive net migration, while the natural change was negative.

The largest increase in absolute terms was in France (+185,900). The highest natural increase was in Ireland (5.0 per 1,000 persons), while the biggest growth rate relative to the existing population was recorded in Luxembourg, Ireland, Cyprus and Malta (all above 8.0 per 1,000 persons).

In total, 22 EU Member States had positive net migration, with Luxembourg (13.2 per 1 000 persons), Lithuania (12.4) and Portugal (9.6) topping the list.

Births and deaths in the EU from 1961 to 2021 (Eurostat)

Where is the population declining?

On the other hand, 18 EU countries had negative rates of natural change, with deaths outnumbering births in 2021.

Ten of these recorded a population decline. In Bulgaria, Italy, Hungary, Poland, and Slovenia population declined due to a negative natural change, while net migration was slightly positive.

In Croatia, Greece, Latvia, Romania and Slovakia, the decrease was both by negative natural change and negative net migration.

READ ALSO: Italian class sizes set to shrink as population falls further

The largest fall in population was reported in Italy, which lost over a quarter of a million (-253,100).

The most significant negative natural change was in Bulgaria (-13.1 per 1,000 persons), Latvia (-9.1), Lithuania (-8.7) and Romania (-8.2). On a proportional basis, Croatia and Bulgaria recorded the biggest population decline (-33.1 per 1,000 persons).

How is the EU responding to demographic change?

From 354.5 million in 1960, the EU population grew to 446.8 million on 1 January 2022, an increase of 92.3 million. If the growth was about 3 million persons per year in the 1960s, it slowed to about 0.7 million per year on average between 2005 and 2022, according to Eurostat.

The natural change was positive until 2011 and turned negative in 2012 when net migration became the key factor for population growth. However, in 2020 and 2021, this no longer compensated for natural change and led to a decline.

READ ALSO: IN NUMBERS: One in four Austrian residents now of foreign origin

Over time, says Eurostat, the negative natural change is expected to continue given the ageing of the population if the fertility rate (total number of children born to each woman) remains low.

This poses questions for the future of the labour market and social security services, such as pensions and healthcare.

The European Commission estimates that by 2070, 30.3 per cent of the EU population will be 65 or over compared to 20.3 per cent in 2019, and 13.2 per cent is projected to be 80 or older compared to 5.8 per cent in 2019.

The number of people needing long-term care is expected to increase from 19.5 million in 2016 to 23.6 million in 2030 and 30.5 million in 2050.

READ ALSO: How foreigners are changing Switzerland

However, demographic change impacts different countries and often regions within the same country differently.

When she took on the Presidency of the European Commission, Ursula von der Leyen appointed Dubravka Šuica, a Croatian politician, as Commissioner for Democracy and Demography to deal with these changes.

Among measures in the discussion, in January 2021, the Commission launched a debate on Europe’s ageing society, suggesting steps for higher labour market participation, including more equality between women and men and longer working lives.

In April, the Commission proposed measures to make Europe more attractive for foreign workers, including simplifying rules for non-EU nationals who live on a long-term basis in the EU. These will have to be approved by the European Parliament and the EU Council.

In the fourth quarter of this year, the Commission also plans to present a communication on dealing with ‘brain drain’ and mitigate the challenges associated with population decline in regions with low birth rates and high net emigration.

This article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK.

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