The relationship between friendly nations European Union and Switzerland has deteriorated as investment firms from either side are not allowed to trade in each other’s stock exchange. Earlier due to an arrangement called equivalence both could trade but since it lapsed in June this year the European Commission has decided not to renew it for the time being. This move seems to have irked Switzerland and it decided to ban trading of its shares on EU bourses. The economic relations of Switzerland with European Union are governed by 120 bilateral agreements in all which give access to Swiss based business to all of EU’s markets.
But now European Commission wants to upgrade and simplify the old agreement with a new agreement framework as it believes that the current situation is incoherent and not sustainable. Though they shared the new agreement draft with Switzerland, its government has presented it for public consultation and also asked for several clarifications. This delay frustrated the EU side which allowed the equivalence agreement to expire and put an end to Swiss trading in EU markets. The Swiss government stated that EU’s new agreement can lead to the latter’s citizens getting more benefits.
They also fear that it may reduce state subsidies to corporate sector and make it tough to maintain the current high wages in Switzerland due to competition from low wage regions. But experts believe that this has a political angle as well as Swiss People’s Party that is inclined towards rightist ideas is hostile to EU and free movement of workers. The financial equivalence agreement includes high level of investor protection and measures to prevent insider trading. As of now the EU has made equivalence decisions on insurance, credit rating and also auditing practices. The row shows that EU is prepared to use the equivalence during negotiation to apply pressure on Switzerland if they can.