EU-Swiss recriminations is a warning to the UK
Britain has long complained that equivalence deals can be revoked with little notice
Brussels is growing exasperated with an indecisive government after years of complex negotiations over a third country agreement that can’t pass through its troublesome parliament. The European Commission is now on the brink of cutting off the lucrative financial centre from European market access, sparking a series of tit-for-tat reprisals.
It sounds like a vision of Britain’s strained future with the EU without a Brexit deal. In fact, it’s the current story of how Switzerland is faring in interminable talks with Brussels over how to better arrange its messy trading relationship with the bloc.
The Alpine state — which is outside the EU and European Economic Area — has spent the last four years negotiating a “framework” deal with Brussels that would require Switzerland to automatically adopt some EU laws and court rulings in return for enjoying the benefits of the single market.
But in a tale that sounds all too familiar to Brexit negotiators, the Swiss government has struggled to convince its parliament and public to swallow an arrangement that would push Bern closer to the EU.
To keep the squeeze on the Swiss, the commission has kept the country’s stock traders on a tight leash. Brussels has granted Switzerland short-term “equivalence” deals, granting equity traders temporary access to EU markets depending on how political talks are progressing. But negotiations have gone sour and market access is due to expire this Sunday.
Contingency planning is kicking in. Swiss authorities insist they have been preparing for this “no deal” outcome since January. Brussels officials admit they “don’t know” what happens with the end of equivalence. In a letter to Bern, a senior EU official said the disruption from the loss of market access would “cause no major disruption” to financial stability. We’ll only find out come Monday morning.
The spat over equivalence is being closely watched in the City of London. The UK has long complained that equivalence deals, which are granted at the behest of the commission, can be revoked with little notice. Equivalence is exactly the kind of accord the UK financial services will be relying on after Brexit.
The Swiss meanwhile do not look ready to accept the framework deal any time soon. A federal election looms in October. The longer the process drags on — with EU capitals at the same time hardening towards the Brits — the greater the costs may be for the Swiss.
The likes of Germany, Austria and Luxembourg had been worried about the commission keeping the Swiss tethered to short-term equivalence decisions, fearing for the bloc’s broader financial health. But there’s now broad acceptance among EU governments that Swiss intransigence must be made an example.
“If you always threaten to do something and never see it through, what’s the point?” said an EU diplomat closely following the Swiss file.
“This much is true: we won’t treat the Brits any worse than we treat the Swiss.”