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(Bloomberg) -- The European Union’s bid to streamline its intricate relationship with Switzerland got a boost on Thursday with a pledge to settle unresolved issues by early next year. 

Talks on a so-called institutional framework agreement are “moving in the right direction,” European Commission President Jean-Claude Juncker said at press conference after meeting his Swiss counterpart in Bern. “While we’d wanted to have it by the end of the year, we’re of one view that we’ll agree on the friendship pact between Switzerland and the EU by spring.”

The Swiss rejected joining the EU a quarter of a century ago and, instead, their relations are governed by more than 100 agreements on everything from civil aviation to the free movement of people. While the relationship has flourished -- Switzerland is the EU’s No. 3 trading partner -- Brussels is keen to embed the country more deeply into its institutional machinery and talks have been under way for more than three years.

“We sorted out legacy disagreements and are looking toward the future,” Swiss President Doris Leuthard said in Bern alongside Juncker. She added that two to three items still hadn’t yet been decided in the framework deal.

Up until recently, relations between the EU and Switzerland had been strained after the Swiss voted in a 2014 plebiscite to re-introduce immigration quotas. To save the economically vital ties, the parliament in Bern late last year enacted a bill that sidestepped limits for newcomers in favor of a system giving local residents a leg up on the job market.

“I’m happy that on the matter of the free movement of people we succeeded in arriving at an internal Swiss solution that is such that we can encounter it with sympathy,” Juncker said.

“The EU wants to make sure there is a continuous mechanism for incorporating European law into the Swiss system and ensuring independent enforcement,” said Jacques Pelkmans, a senior fellow at the CEPS think tank in Brussels. “At the moment, it’s an autonomous process that allows an a la carte approach by the Swiss and that weakens EU enforcement. There’s a sentiment in EU circles that the Swiss have strategically been doing a lot of cherry picking.”  

A deal on the framework agreement is vital for Switzerland as the bloc has said that a resolution on so-called “horizontal issues is necessary before the EU is ready to conclude new agreements giving Switzerland access to further areas of the single market.”

Carbon Pact

On Thursday, the EU and Switzerland also signed a pact linking their carbon-dioxide markets, which curb greenhouse gases blamed for global warming. The link between the EU Emissions Trading System and the Swiss cap-and-trade program will become operational next year.

The EU carbon market, the world’s biggest, covers 28 nations in the bloc as well as Norway, Iceland and Liechtenstein and linking it to the Swiss system would be the first process to cooperate with a third country in an effort to step up the fight against climate change.

The Swiss also agreed to offer two additional loans for EU cohesion funds that support poor regions in Europe, worth a total of 1.3 billion euros ($1.5 billion). They’re set to be submitted to Swiss parliament and could be subject to approval via referendum.

That may also be the fate of any framework agreement, which isn’t without its critics in Switzerland. The anti-immigrant Swiss People’s Party is concerned the EU’s judiciary may gain sway over Switzerland and is attempting to stymie such an accord.

“A referendum on an institutional framework agreement is by no means without a chance, but it depends entirely on what the EU and Switzerland have negotiated with each other,” said Thomas Schaeubli, a political risk analyst at Wellershoff & Partners Ltd. in Zurich, who highlighted that slowing net immigration would bolster support for an EU treaty. Still, “there’s quite a wait in store until it comes to a referendum.”

--With assistance from Ewa Krukowska

To contact the reporters on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net, Jonathan Stearns in Brussels at jstearns2@bloomberg.net.

To contact the editors responsible for this story: Jan Dahinten at jdahinten@bloomberg.net, Nikos Chrysoloras at nchrysoloras@bloomberg.net, Zoe Schneeweiss, Richard Bravo

©2017 Bloomberg L.P.

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