Stratfor
Summary
Switzerland is at the geographic center of Europe and in many ways is thoroughly integrated with the European Union, but the country resists full institutional integration for strategic reasons. Bern's "discriminatory" approach to immigration drew the ire of the European commissioner for employment, social affairs and inclusion earlier this week.
Through bilateral agreements, Switzerland tries to find a balance between independence and integration with the rest of Europe. Maintaining this balance will become more difficult as the European crisis lingers and Euroskeptical forces in Switzerland remain strong. Brussels, as well as core countries such as France and Germany, is likely to put additional pressure on Switzerland out of fear that its selective European integration strategy will gain momentum in EU countries, thus weakening the bloc's structures. However, this pressure is unlikely to be effective because the European Union's crisis has further weakened the Swiss group advocating EU membership.
Analysis
The relationship with the European Union is a constant debate in Switzerland. The debate centers on three issues: the benefits of European integration, the degree of foreign influence that is acceptable and how Switzerland's decentralized political system and direct democracy conflict with potential EU membership.
A Long and Complicated Relationship
Switzerland is a mountainous country lacking natural resources, but it uses its location to its advantage. It is an important transit state and has a very strong export-oriented economy that is heavily dependent on access to the European market. According to Eurostat, Switzerland's goods and services surplus was 10 percent of gross domestic product in 2012, nearly twice Germany's. Exports of goods and services are the equivalent of about 52 percent of GDP (a similar percentage to Germany). Pharmaceuticals, machinery and commercial services are the primary Swiss exports. In 2012, 56 percent of Swiss exports went to an EU member and 75 percent of imports came from the union.
Despite its dependence on strong ties with the European Union, Euroskepticism is strong in Switzerland. In 1992, the Swiss unexpectedly voted against joining the European Economic Area. Most political parties were in favor of joining but critics argued convincingly that the government was misleading the population and aiming for full EU membership. Since then, Bern's strategy has been to seek deeper integration with Europe in specific areas through bilateral agreements while avoiding full membership.
This strategy has been relatively successful. Through a free trade agreement signed in 1972, Switzerland has access to the European common market, and it has found closer ties with Europe in other areas. Switzerland signed an agreement in 1999 on the free movement of labor with the European Union that was expanded as the bloc grew, and in 2004 the country joined the Schengen area.
The Swiss generally understand that, because of their country's topography and position, they are dependent on good relations with their neighbors and the rest of Europe to secure the country's economic well-being. However, the debate over the degree of openness, particularly with regard to immigration, triggers political tensions domestically and with the European Union. There are also tensions because of Switzerland's policies in the financial sector, although Bern has been slowly increasing its transparency.
The Never-Ending Debate Over Immigration
Immigration has long been a controversial topic in Switzerland. The country has seen waves of immigration as the need for labor rose due to large infrastructure projects or as a result of political and social turmoil elsewhere. Like most of Europe, Switzerland has a low birth rate and an aging society. Therefore, attracting foreign labor is vital to ensure the sustainability of the work force and social security system.
According to data from the Swiss statistical office, close to a quarter of the 8 million people living in Switzerland in 2012 were foreigners (20 percent of them were born in Switzerland but lack Swiss citizenship). This is a far higher percentage than in neighboring Germany (9 percent), France (6 percent), Italy (8 percent) and Austria (11 percent). Switzerland's high salaries and economic resilience to the European crisis have attracted people to the country. While decreasing, net immigration between 2009 and 2012 averaged 60,000 people annually. With the expansion of the European Union, the number of Eastern Europeans moving to Switzerland has increased, but they still make up a small percentage compared with Italians, Germans, French and Portuguese, who jointly account for 50 percent of the foreigners living in Switzerland.
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The persistently high levels of immigration fuel the debate over whether Switzerland should have a more restrictive immigration policy. Switzerland will hold a referendum Feb. 9 on the introduction of annual quotas on residence permits for foreigners. The Swiss business community and government have opposed the referendum and warn that, if approved, it would complicate matters with Brussels since bilateral agreements -- not only on the free movement of people -- would have to be renegotiated.
The popular initiative -- the mechanism through which Swiss parties and citizens put forward issues that the population should vote on in referendums -- is spearheaded by the right-wing Swiss People's Party, which is the largest party in the country and has an anti-immigration and Euroskeptical agenda. The party warns that EU membership would cost the country an important degree of sovereignty and independence. The Swiss political system is heavily decentralized, and the popularity of the Swiss People's Party reflects widespread concern about immigration and the potential centralization of power and growth of EU influence in the event that Switzerland joined the union.
The Selective Approach
Switzerland has a long history of skepticism toward joining supranational institutions. Despite hosting a number of U.N. institutions, the country did not join the grouping until 2002 out of fear that membership would conflict with its neutrality. (The Swiss voted against joining the U.N. in a referendum in 1986.)
The selective approach to European integration reflects Switzerland's balance between avoiding isolation, which would harm the country, and Bern's underlying opposition to delegating decision-making.
Brussels has long viewed the Swiss strategy with skepticism, and considering the ongoing European crisis, it could be viewed as an increasingly important threat to the union's overall stability. As a result of the crisis, Euroskepticism in numerous EU countries is gaining strength. Most Euroskeptics are not opposed to European integration on all fronts but question its benefits in certain areas and the benefits of centralizing power. Countries such as the United Kingdom and Denmark, despite being full EU members, have refrained from EU integration in certain areas. However, there is growing pressure, especially in London, to once again renegotiate ties with the bloc. Switzerland's approach and success thus far is likely to gain attractiveness among Euroskeptics and be used to justify the benefits of a more selective approach to European integration.
Over the coming year, Switzerland will likely have several more referendums broadly dealing with the question of European integration. Debates about the overpopulation of Switzerland and labor mobility with the European Union's latest member, Croatia, are two issues requiring the opinion of the Swiss. Bern and Brussels are currently evaluating how to maintain positive ties through bilateral agreements, a process that is likely to lead to new popular initiatives by Euroskeptical groups in Switzerland.
Aiming to ensure the cohesion of the eurozone and the European Union, Brussels and EU members, particularly Germany and France, will likely try to complicate Switzerland's strategy by pressuring the Swiss to make a more fundamental decision over whether they want to integrate. To an important degree, the pressure Brussels can apply will depend on the outcome of future referendums. For example, if Switzerland introduces immigration quotas, the European Union will be able to generate more fear among the Swiss business community by putting Switzerland's bilateral agreements overall to question. Pressure on Switzerland will likely radicalize the Euroskeptics in Switzerland and divide the Swiss public, especially as business representatives warn of the dire economic consequences from worse relations with the European Union. But in light of the bloc's structural crisis, most Swiss will continue to see joining the European Union as an unattractive option.
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