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16th Jul 2018

EU angers Switzerland over stock market access

  • 'The EU is acting this way to weaken the Swiss financial centre,' said Swiss president Doris Leuthard (r), who threatened possible retaliation (Photo: European Commission)

The EU angered Switzerland on Thursday (21 December) when it granted Swiss stock exchanges access to EU markets for only one year.

The decision on equivalence, which implements a new Markets in Financial Instruments Directive and Regulation (called MiFID II/MiFIR), will enter into force on 3 January.

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It was adopted by the European Commission on Thursday after member states - except the UK - supported it.

Its renewal next year will depend on progress in the negotiations between Switzerland and the EU over an institutional agreement on their long-term relations.

"We will be assessing progress on that by end of next year," said commission vice president Valdis Dombrovskis.

He argued that "Swiss operators will continue enjoying access to the EU market, and EU investment firms will be able to trade shares in Switzerland."

But in Bern, Swiss president Doris Leuthard said "the EU is acting this way to weaken the Swiss financial centre."

"It is unfounded and unacceptable to link this technical issue to the institutional question," she insisted after an emergency meeting of her cabinet.

The Swiss government pointed out that the commission recently granted the US, Hong Kong and Australia access to EU markets unlimited in time.

Switzerland "fulfils the conditions for the recognition of market equivalence," Leuthard said, adding that the EU's decision was "a discrimination".

The commission argued that in comparison with these three countries, "the scope of the Swiss decision is much greater, as the trading of Swiss shares in the EU – and vice versa – is more widespread."

"This decision should not come as a surprise," a commission official said in Brussels.

The official pointed out that the linkage between the equivalence and the institutional agreement was "the reflection of what has been repeated by the commission and member states for the past three years."

He said that the decision to limit the equivalence to one year was justified because there is "dissatisfaction that no progress has been made in the institutional negotiations and that no progress will be made in the timeline expected."

Switzerland and the commission have been negotiating an institutional agreement since 2014 in order to give a legal framework to a set of more than 120 bilateral agreements - the main ones covers issues like police, justice and tax cooperation, agriculture, and free movement.

Talks are currently stuck over state aid and the role of the EU Court of Justice in overseeing the agreements.

The EU official noted that the commission made proposals in November to unblock the talks and that Switzerland was "beginning to see the political consequence" of the deadlock.

Possible retaliation

The Swiss government said on Thursday it was considering retaliation to the EU's decision, including the suspension of €1billion in aid to eastern Europe countries that was recently approved after years of delay.

EU-Switzerland relations have been strained since Swiss voters voted in a referendum in 2014 in favour of introducing immigration quotas into the country's constitution.

In reaction, the commission suspended Switzerland's participation in the EU research and student programmes, Horizon 2020 and Erasmus+.

It took more than two years, until December 2016, to agree on a new free movement regime between the EU and Switzerland.

Negotiations over free movement, as well as on the ECJ's role, have taken place as the EU is also negotiating the UK's exit, with the two same issues being among the most controversial topics.

The commission has however dismissed the idea that it was tough on Switzerland in order not to set a precedent that could be then used by the UK.

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