Reuters International

By Michael Shields

ZURICH (Reuters) - A conservative Swiss party said it had withdrawn its support for a compromise deal on immigration with the European Union, and would push instead for quotas on workers from the bloc, raising the chances of a confrontation with Brussels.

Switzerland has been on a collision course with the EU since most voters demanded immigration curbs in a referendum in 2014, jeopardising a pact that gives the Alpine nation special access to the EU market in exchange for free movement of workers.

Swiss lawmakers have to put the referendum demand into law. But they have been trying to defuse the situation by drawing up a compromise package, with legislation encouraging the hiring of local people rather than overtly limiting outsiders.

The Christian People's Party (CVP) originally backed the package. But it announced its change of heart before a visit by European Commission President Jean-Claude Juncker on Monday to discuss the immigration stand-off.

"We have to bring this solution closer to the will of the people," CVP parliamentary leader Filippo Lombardi told Swiss SRF radio in an interview aired on Wednesday.

The announcement came a week before the Swiss lower house of parliament was due to vote on the compromise package. Under Swiss law, the changes demanded by the 2014 referendum must be put into place by February 2017.

EROSION OF SUPPORT

The withdrawal of the backing of the CVP's 27 lawmakers is not enough to sink the compromise deal in the 200-seat lower house.

But it marked a significant erosion of support for the agreement, which is already opposed by the hardline Swiss People's Party (SVP), the largest group in the house with 65 MPs.

Kurt Fluri, a member of the pro-business Liberals party (FDP) who brokered the compromise deal, said such manoeuvring was normal a week before a parliamentary vote and he was not alarmed by the U-turn.

"I go into the parliamentary debate with a good feeling... that our concept will make it through," he told the same radio station.

In Brussels, an EU official said even the compromise proposal on the table, while more acceptable to the bloc than a quota system, was not going far enough.

But Brussels was still determined to get a deal with Switzerland by the end of the year, the official said.

Any accord will be scrutinised for potential hints of what Britain might expect after its June vote to leave the bloc, although both sides have stressed a deal must be custom-made for Switzerland.

"If we give Switzerland more than we have offered Britain in the deal to keep it in, we will be accused that Brexit is our fault. Looking forward, any solution with Switzerland will set a precedent," the EU official said.

"That is why on the free movement of people we have to be very careful and firm with Switzerland."

Free movement of people is a cornerstone of EU policy and a condition of access to its single market of 500 million people.

Britain voted to leave the EU in large part to stop immigration by EU citizens that critics say has pressured jobs, social services and schools.

(Additional reporting by Gabriela Baczynska in Brussels; Editing by Andrew Heavens)

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