ADVERTISEMENT

Switzerland Moves to Avert Stock Market Cliff-Edge on EU Treaty

Swiss Give EU a Nod But Want More Details Before Signing Treaty

(Bloomberg) -- Switzerland moved closer to solving an impasse with the European Union over its stock exchange by signaling its general support for a controversial accord governing its relations with the bloc.

The country’s equity market is at risk of being cut off from EU investors after Brussels made any regulatory extension for the bourse contingent on progress on the political accord. On Friday, the Swiss government said that while it wants clarification on matters relating to wage protection, state subsidies and immigration, the draft agreement was “broadly positive.”

“We clear up these three open points, we sign, and we hand the treaty over to parliament” for ratification, Foreign Minister Ignazio Cassis said at a press conference.

That may pave the way for Brussels to extend recognition of Switzerland’s stock exchange under its MiFID II rules, currently set to expire at the end of this month.

“This appears to be an overall positive development,” a spokeswoman for the European Commission said.

Switzerland Moves to Avert Stock Market Cliff-Edge on EU Treaty

Diplomats representing the bloc’s 28 member states will discuss whether to extend equivalence at a closed doors meeting on Tuesday.

Bern and Brussels have locked horns over a pact to replace the 120 bilateral accords that now govern their relations. The proposed framework deal hasn’t been popular with the Swiss, in part because of fears it’ll erode high local wages.

The agreement seeks to replace treaties on everything from agriculture to immigration and civil aviation. It is opposed both by the euro-skeptic political right and labor unions on the left. A recent poll showed two thirds of voters thought the government shouldn’t sign the accord.

That’s even though the EU is Switzerland’s top destination for exports, and businesses say maintaining good, open ties with the bloc is economically vital. A survey published by business lobby economiesuisse in late May found firms backed the controversial proposal by a comfortable margin.

Much at Stake

For a measure of what is at stake, about a third of trading in Swiss shares currently takes place within the EU and the rest in Switzerland, according to SIX Swiss Exchange AG Chairman Romeo Lacher. And the majority of the activity in Swiss shares on SIX comes from traders in the EU.

Switzerland’s Justice Minister said the government expected stock market equivalence to be extended. A spokesman for SIX Swiss Exchange said its top priority remained permanent recognition under MiFID II.

Any accord with Brussels that the Swiss government signs is very likely to face a referendum in Switzerland, Swiss President Ueli Maurer noted in a letter to European Commission President Jean-Claude Juncker, published on Friday.

Bern is obliged to put amendments to the constitution up for a people’s vote, and citizens objecting to a law passed by parliament can trigger a plebiscite by collecting 50,000 signatures from citizens in the country of just over 8 million.

--With assistance from Alexander Weber and Nikos Chrysoloras.

To contact the reporters on this story: Leonard Kehnscherper in Zurich at lkehnscherpe@bloomberg.net;Catherine Bosley in Zurich at cbosley1@bloomberg.net

To contact the editors responsible for this story: Jan Dahinten at jdahinten@bloomberg.net, Vidya Root, Iain Rogers

©2019 Bloomberg L.P.