The European Union is by far Switzerland’s most important economic partner. Switzerland earns approximately every third franc in its trade with EU member states, while almost 55% of Swiss exports go to the EU and two thirds of its imports come from there. Switzerland is also one of the EU’s most important partners in the trade in goods and services as well as in direct investments. To promote this lively exchange, Switzerland has concluded many bilateral agreements in economic matters and finance which permit mutual market access and create important platforms for political discussions and cooperation.
The EU’s economic and finance policy can have a direct impact on Switzerland. It influences economic exchanges and political relations between Switzerland and the EU. Moreover, EU-level regulations can also influence Swiss legislation. To safeguard Switzerland’s interests it is therefore necessary to monitor developments in the EU closely and to analyse their possible impact on Switzerland.
As a result of agreements such as the Free Trade Agreement and the agreement on dismantling technical barriers to trade of 1999 (also known as the Mutual Recognition Agreement, MRA), the cost of importing and exporting goods has fallen considerably. This is significant because the EU is Switzerland’s biggest trading partner and Switzerland is one of the EU’s most important trading partners. Every working day, goods to the value of around CHF 1 billion cross the border between Switzerland and the EU. Most customs duties on goods have been eliminated on the basis of the bilateral agreements, and technical barriers to trade have been lifted in many areas. Switzerland therefore has privileged access to the EU single market for goods. In addition, the mixed committees of the existing agreements offer an important platform for resolving market access problems and other issues.
Switzerland’s competitive financial sector is an important economic sector, in part because of its exports of financial services. One result of the financial crisis is the multitude of EU draft regulations that aim to raise the stability of the financial markets, improve transparency and promote harmonisation of the single market. This includes establishing an EU-wide market-access regime for non-member states, such as Switzerland, that would standardise the previously fragmented national rules on market access.
The EU financial market regulations proposed by the Commission provide for different market-access conditions according to each sector. They contain the following elements:
- Equivalence of the corresponding financial market regulations of third countries with those of the EU
- Equivalence in supervision regimes (implementation of supervision)
- Cooperation agreement between the supervisory authorities concerned (the member states and the EU) and the supervisory authorities of the third country.
In addition to these, other general conditions usually concern combating money laundering or cooperation in tax matters. Some of the market-access provisions also contain requirements for Swiss companies, such as having a subsidiary in the EU.
Switzerland also responded to the financial crisis. Major adjustments to legislation have already been carried out, such as the adoption of Basel III, and the modification of the Collective Investment Schemes Act and the too-big-to-fail regulation. Other projects such as a Swiss financial services act are in progress. With a view to EU market access, it is necessary to weigh up in each case whether or not equivalence with the EU is expedient and makes good sense.
Economic, currency and budgetary issues
The financial stability of the Economic and Monetary Union and the EU overall has a major influence on Switzerland as an economic and financial location. Since the beginning of the crisis, the EU and especially the eurozone member states have been working hard to further develop the economic union that was inadequately prepared when the euro was introduced. This includes, among other things, better coordination of national economic and budget policies, completion of the single market and the strengthening of crisis management. The Stability and Growth Pact too, which establishes the overall conditions of the currency union, has been considerably more tightly structured to combat crises.
To ensure financial stability in the EU and especially in the eurozone as a whole, since the beginning of the crisis a series of differently structured rescue mechanisms have been created. These include bilateral loans, the European Financial Stabilisation Mechanism (EFSM) as a Community instrument, the European Financial Stability Facility (EFSF) as a bilateral and temporary instrument, and the European Stability Mechanism (ESM) as a permanent financial institution in the form of an intergovernmental organisation established under public international law. The aim of these mechanisms is to provide loans to illiquid states under strict conditions in the context of the macroeconomic reforms introduced to overcome acute crisis situations.
The IMF also participates on a one-third-share basis in these programmes. Through its involvement in the IMF, Switzerland is also indirectly involved in these programmes.
As a result of massive inflows of money and other factors, the financial and economic crisis has led to a strong overvaluation of the Swiss franc against the euro, bringing with it the risk of deflation in the Swiss economy. In order to significantly weaken the franc over the long term, as of 6 September 2011, the Swiss National Bank introduced a policy to prevent the euro-Swiss franc exchange rate falling below CHF 1.20. This policy is still in effect.