Talks on closer EU ties remain in limbo

Still poles apart on tax Keystone

Talks aimed at forging a new set of bilateral agreements between the European Union and Switzerland have failed to get off the ground as planned.

A meeting scheduled for Wednesday was postponed at Brussels’ request after EU finance ministers dropped the issue of the bilaterals from the agenda of their meeting on Tuesday.

The two sides cannot even agree on how to conduct negotiations on a new set of ten treaties. The EU wants to negotiate some of treaties separately, whereas the Swiss are seeking to link all ten dossiers so they are discussed as a single package.

The most problematic dossier is that covering cross-border crime. Brussels wants to discuss this separately because it covers includes tax evasion, and therefore has implications for Swiss banking secrecy. Brussels is seeking to tax income on EU assets held abroad, and wants access to information about its citizens’ bank accounts in Switzerland.

Tax evasion

The Swiss, fiercely protective over “bank customer confidentiality”, view tax evasion as a customs offence, and say it therefore does not qualify for legal assistance – the exchange of information – between Bern and Brussels.

In the view of Swiss political analyst, Julian Hottinger, Switzerland has been caught off guard by Brussels’ hard line on the banking secrecy issue – one reason the talks have hit so many stumbling blocks.

“The Swiss were surprised to see that all of a sudden a lot of pressure was being put on their banking system and I think they haven’t had time to put together a strategy.”

The Swiss government’s position is that banking secrecy is “not negotiable”, and it has instead proposed levying a withholding on EU citizens’ savings in Switzerland.

The Swiss see this is as an ideal compromise – Brussels would get its money, and Swiss banks’ clients would retain their privacy.

Harmonisation of laws

However, according to Hottinger, Brussels is seeking more than tax revenues – it wants Swiss laws harmonised with its own.

“The EU believes Switzerland is a candidate [for membership] and wants to treat it as such,” Hottinger told swissinfo. “Whereas the Swiss government is probably looking at the bilaterals as an alternative to joining… so fundamentally there is a contradiction and I think there’s some difficulty in agreeing on how things should proceed.”

The Swiss cabinet says it remains united on the issue of banking secrecy, although there has been speculation that some members – notably the foreign minister, Joseph Deiss, and the economics minister, Pascal Couchepin – favour compromise to reach a deal.

However, the finance minister, Kaspar Villiger, is said to be immovable, fearing that any relaxation of banking secrecy could result in a capital flight of non-resident assets, estimated to be worth over $1 trillion.

The picture is complicated by the public’s view, which changes depending on the arguments and the latest opinion polls. A recent survey suggested that voters would be prepared to give up banking secrecy – other polls suggest they are firmly behind it.

Confusion

Hottinger said the confusion is reflected at all levels. “The Swiss have to come in with a clearer agenda [to take to Brussels] – the executive is saying one thing, the legislature is saying something else, and public opinion is having difficulty following the debate which is hard to follow and very technical.”

There have been suggestions that Switzerland can hold out indefinitely, or even walk away without an agreement since one set of bilateral accords – governing certain trade issues and the free movement of people – has already been wrapped up and is due to come into force in June.

However, Hottinger told swissinfo that this is a pipe dream, and in the long term an agreement has to be reached.

“The Swiss can’t postpone this indefinitely – we would be able to postpone it for a while, but it’s quite clear that within the next year, or year and a half, we have to come out with a solution.”

swissinfo