The EU has this summer refused Switzerland’s request to renegotiate a bilateral treaty on free movement after Swiss voters chose to close the country’s borders to Croatian workers. As a result, the Erasmus programme will be interrupted, penalising European students, and the proposed interconnection of the electricity market will not get off the ground.
The European Union is standing firm against Switzerland, seven months after February’s referendum on immigration, which has paved the way for a quota on the number of foreigners allowed to enter Swiss territory.
>> Watch our video report: EU warns Switzerland of consequences after anti-immigration referendum
Switzerland sent a formal letter to the EU External Action Service on 7 July, explaining that the new constitutional article arising from the vote of 9 February was incompatible with the existing agreement between the European Union and the Confederation on the free movement of people, and requesting a renegotiation of the treaty.
After consulting the member states, Lady Ashton, the EU’s High Representative for foreign policy, replied in a letter addressed to President Burkhalter that “the European Union was not able to respond positively to his request”.
This formal exchange takes the disagreement to a new level. Switzerland had already refused to sign the free movement treaty with the European Union’s newest member, Croatia, reasoning that the result of February’s referendum should prohibit the signing of any new agreements, even if those already in force should remain valid.
The Swiss government now has three years in which to apply this new law, meaning that citizens of the European Union, with the exception of Croatia, can still enter Switzerland until 9 February 2017.
Whilst officially ruling out retaliation, the European Union believes that the Swiss should incur consequences for this backward step. The scope for action available to the EU is, however, limited.
Erasmus places in Switzerland fall 25%
Just days from the start of the new school year, the EU announced the exclusion of Switzerland from the Erasmus+ programme.
An “interim solution” has been put in place, whereby the Swiss state is directly responsible for financing their students who study abroad at European universities and, for an extra administrative fee, European students who study in Switzerland. But this interim solution favours Swiss students.
According to Lucia Würsch of the Swiss Foundation for Confederal Collaboration, “over 3,000 Swiss students will study or work abroad in 2014-2015,” an increase on the 2,860 Swiss students that took part in the Erasmus programme in 2013-2014.
The consequences of excluding Switzerland from Erasmus will in fact be felt most acutely by EU students, whose access to prestigious Swiss universities will be limited. The number expected to study abroad in Switzerland in 2014-2015 is expected to be below 3,000; a fall of 25% on last year’s figure of 4,295 students.
For a measure designed as a sanction against the introduction of quotas for EU citizens, this seems absurd.
Interconnection of electricity markets in limbo
The cooling of relations also has consequences on electricity markets. The interconnection of the Swiss electrical grid with the rest of Europe was due to take place by the end of 2014, but the European Union has frozen negotiations after the referendum on 9 February.
In May EU heads of states gave the Commission the green light to negotiate a new agreement with Switzerland, so in theory, progress could still be made on the internal market and the electricity market.
“The negotiations resumed this summer,” the Swiss Federal Office of Energy announced. But according to the spokesperson for DG Energy at the Commission, “the technical discussions can proceed, but the conclusion of a deal on the subject is suspended until the conflict over the free movement of people is resolved”.
Operators like Epex, who run the electricity exchange between Switzerland, France and Germany, are unhappy about the delay. Around 10% of electricity generated in Europe goes through Switzerland, which makes it a pivotal player in the European market,” the Epex spokesperson explained.
Under the present system, exchanges require complicated operations by the network managers, including the compulsory reservation of capacity at the borders whenever operators want to buy outside their territory. The exchanges take place “over the counter” between companies, outside the organised market. Unlike a market place, this environment is not conducive to good prices.
“The completion of an interconnected market will bring social gains; pricing will be optimised and infrastructure will be used to best effect,” the spokesperson of the European electricity exchange explained. Epex currently carries out very short term exchanges, on a day by day basis, between Switzerland and three neighbouring countries; Germany, France and Austria. However, Epex must wait until a European agreement is finalised before it can connect the neighbours to the “day-ahead” market, which accounts for the vast majority of electrical exchanges.
The Swiss electrical supplier Alpiq summarised the situation, “the current will continue to flow even without an agreement, but in a more complicated way and with higher prices”.
Indivisible fundamental freedoms
Meanwhile, the Commission insists it is impossible to enjoy one fundamental freedom without guaranteeing the others.
“The question of the free movement of people cannot be brushed aside. The postponement of certain negotiations is a logical consequence of the choice Switzerland has made, a logical consequence that should not be at all surprising”, it said.
According to the Commission, which plans to apply leverage with fiscal policy in addition to the electricity market and the Erasmus programme, “the conclusion of an ambitious fiscal agreement authorising the automatic exchange of information would allow Switzerland to regain the confidence of the international community, which seems to be needed after the vote on 9 February”.
On 9 February 2014 the Swiss voted in favour of an initiative launched by the Democratic Union of the Centre (also known as the Swiss People's Party) called "Against Mass Immigration".
The new constitutional article demands a limit to the number of foreigners allowed to enter Swiss territory, and allows for employers to give preference to Swiss nationals when hiring.
As these measures are contrary to the freedom of movement agreement signed with the EU, Switzerland has asked to renegotiate. Brussels has flatly opposed this request.
The practical consequences currently affect students, who can no longer benefit from the Erasmus+ programme, and buyers and sellers of electricity, who will see the interconnection of the electricity market postponed sine die.