Switzerland must endorse a draft treaty with the EU by June 17 or risk access to European capital markets.

The Swiss government is asking for more clarifications, particularly on the issue of wage-worker protection, as Brussels is demanding access to the Swiss labour market on equal terms.

One of the immediate consequences should Switzerland fail to ratify the EU-Swiss agreement is that Swiss companies would lose access to EU-based capital markets.

Since 2018, the EU has repeatedly threatened Switzerland’s financial sector with a so-called withdrawal of ‘equivalence’, which means EU companies would have to suspend their listing on the Zurich exchange and Swiss companies would need to do the same in the EU.

Much like the UK, Switzerland depends on the EU market for food and, to some extent, medicine. Though Brussels is ready to impose measures that could harm the relationship, the EU has said that it wants the crisis to be solved amicably as the bloc has demographic interests as 1.4 million EU citizens live in Switzerland, while more than 300,000 European residents commute across the Swiss border on a daily basis.

The EU’s push for regulatory alignment predates Brexit, but negotiations with London have added political urgency to the issue

Since Switzerland refused to join the European Economic Area in 1992, the Swiss government has created a close relationship with the EU through 120 bilateral agreements. These agreements have been referenced by the UK during its negotiations over Brexit.

The EU has sought to revise the Swiss model and close the door to “third parties” like the UK who want to negotiate tailor-made bilateral relations with the EU.  The proposed overarching agreement that is currently on the table covers the issue of freedom of movement, the mutual recognition of industrial standards, agricultural products, as well as air and land transport. It envisages Swiss rules automatically adapting to EU regulations and giving the European Court of Justice ultimate authority on legal interpretation.

Bern is raising objections as the deal cannot gather a political consensus. Switzerland’s Interior Minister Karin Keller-Sutter is requesting an extension of equivalence until the government can secure a consensus on the proposed deal.