Small, wealthy Switzerland has just spurned the chance for greater integration with the EU, preserving its sovereignty but likely paying a high price in the future, Oliver Hartwich writes.
Imagine you are a small country of just under nine million people. Your neighbour has a common market of 450 million consumers and 24 million companies. Wouldn’t you be desperate to join that club?
Well, as the great singer-philosopher Jessie J told us, “It’s not about the money, money, money”. That might have been Switzerland’s reason for refusing to sign a new framework agreement with the European Union.
Last week, following six years of intense negotiations, the Swiss government pulled out of the talks on a new treaty. It preferred Switzerland’s sovereignty over the gains of deeper integration into the EU.
Admittedly, it helps to be rich, and the Swiss certainly are affluent with per capita incomes more than twice the EU average. A part of that affluence also has something to do with Europe.
Since the late-1990s, more than 120 agreements have bound Switzerland into the EU’s economic system. And since the time of the (then) European Economic Community in the 1970s, the Swiss have had a free trade agreement with Europe.
The integration of Switzerland into the EU’s common market is not just comprehensive; it is also highly beneficial to the Swiss. Switzerland gets more than any EU country out of participating in the EU’s common market.
In a 2019 study from the Bertelsmann Foundation, Switzerland recorded the highest per capita gains per year through the common market. At 2,900 Euros, those gains were above Luxembourg’s (2,800 Euros) and Ireland’s (1,900 Euros) – and miles ahead of southern European countries like Spain (590 Euros), Portugal (500 Euros) or Greece (400 Euro).
Locking in the advantages of its participation in the EU should have been a straightforward decision for Switzerland. Opinion polls even suggested almost two thirds of Swiss voters would have tended towards supporting a new treaty with the EU. Still, and astonishingly, it fell through. Why?
There is no simple answer to this question. It was not a populist revolt of a ‘Brexit’ nature – most voters were most likely in favour. It was not a left-wing or right-wing rebellion, either. Both trade unions and the conservative SVP party were both against the new EU treaty.
What it came down to was a matter of sovereignty. The EU Commission’s unwillingness to understand Swiss sensitivities did not help.
There is no country quite like Switzerland anywhere in the world. Its system of governance can be traced back to 1291, even though the modern country was only established in 1848. Over the centuries, the Swiss have developed a national mentality which emphasises its independence, liberty and neutrality.
Dealing with the giant EU, which surrounds Switzerland (besides a 41-kilometre-long border to Liechtenstein), is a constant balancing act. The Swiss are free traders. They do not want to be mere recipients of orders from a multinational bureaucracy – which is how many see the EU in Brussels.
From the Swiss perspective, there were three major concerns: that the EU could interfere with Swiss national subsidies; that EU citizens’ rights to live, work and claim benefits could be strengthened; and that Switzerland’s high wages could be undercut via the EU.
Some of these issues stand on shaky economic ground. One of the EU’s most beneficial roles has been to keep a watchful eye over its member states’ subsidies regimes. It regularly intervenes when members are showering preferred companies with favours.
But it is one thing for the EU Commission to engage with its own members in these ways. It is another when the recipient of such interference is not a formal member of the club.
The EU Commission never appreciated the Swiss mindset. From Brussels’ perspective, it was all about the money. The EU worldview, in this sense, is completely transactional. To be part of the EU’s common market, you must accept the full package – including cessation of your cherished national sovereignty. It is a black-or-white approach with little room for nuance.
From the Swiss government’s perspective, the EU stubbornness pushed it towards the exit door. Had the EU been just a little more accommodating, the new treaty would have worked. Instead, Switzerland will now witness its more than 120 agreements with the EU lapse one by one and its integration into the common market slowly wither away.
It is a high economic price to pay for Swiss businesses, and their representatives made it known how disappointed they were with this outcome. But it is the logical conclusion of the clash of cultures between Berne and Brussels.
The EU Commission, meanwhile, may feel righteous and vindicated. In its view, it stood steadfast against Swiss cherry-picking demands. It probably believes that in doing so, it sent a clear signal to others that there is no way to gain concessions or opt-outs from its political and economic framework.
The problem with this self-congratulatory attitude is that it overlooks the damage it has caused. Not just with Switzerland. It is the precise same approach the EU had taken to Britain before Brexit. Prime Minister David Cameron pleaded with the EU to get some small wins that he could have claimed as trophies. Brussels gave him nothing. The price of doing so was Brexit.
The EU’s approach carries the seeds of its own destruction. As the pressures and contradictions within the EU grow, the Union needs to allow itself more safety valves for its members. It already has a few – such as the Danish and Swedish opt-outs from the monetary union. It may well need more such flexibility, perhaps leading towards an EU of concentric circles of different integration levels.
As the Swiss case and Brexit show, the EU’s internal logic prevents such agility.
The danger, from Brussels’ perspective, is that this could provoke more countries to join Switzerland’s and Britain’s chorus. Which sounds a bit like Jessie J’s: “We don’t need your money, money, money / We just wanna make the world dance / Forget about the price tag.”
That is the price tag of Brussels’ integration dogmatism.