The letter has been circulating in Brussels for days and in Bern since last Wednesday. It is a note of june 17th from the austrian EU Commissioner Johannes Hahn to Jean-Claude Juncker, the President of the EU-Commission on relations of the EU with Switzerland. The fact that the letter landed quickly in Berne should not be seen as a accident. It is addressed at least as much to the Federal Council of Switzerland as to EU leaders – and, of course, London.

Hahn writes to his boss that Switzerland is benefiting from the EU’s internal market, but that it is only “insufficient” adopting its regulation, which leads to unilateral advantages and discrimination against European companies. (He interestingly doesn’t think of dismissing the regulation that causes disadvantages for EU businesses.) There are no clear rules for state aid or a dispute settlement procedure that would give the EU legal certainty.

“I have the distinct impression that the Swiss government has been playing for time ever since our political agreement last year,” Hahn continues. The Federal Council is unwilling to commit itself to the agreement before the federal elections in October. For this, the Swiss asked for “clarifications”. In Hahns view they not “innocent”, but would lead to the reopening of the agreement on state aid, free movement of persons and the so called “flanking measures” on wage protection.

Hahn thus admits that the draft framework agreement neither guarantees wage protection, protects state aid, for example of the cantons, nor protects Switzerland from adopting the EU Citizens’ Directive. Hahn does not mention, however, that two weeks ago the Federal Council accepted the highly controversial domestic dispute settlement mechanism with an arbitration tribunal subordinated to the EU Court of Justice.

Contrary to the willingness of the EU to swiftly provide the “clarifications” requested, the Federal Council wants to carry out further internal consultations instead of working hard on the “domestic landing zone”, Hahn continues. The extension of stock exchange equivalence at the end of 2018 was in his eyes a symbolic incentive for Switzerland so that the Federal Council would sign the agreement quickly and would stand behind the framework agreement.

Hahn writes that he comes to the conclusion that Switzerland’s steps in favour of the framework agreement are “clearly insufficient”. There was a lack of political will. The expiry of stock exchange equivalence is the “warning shot” that Switzerland “needs”. But the EU must also indicate that it will revert it, if Switzerland commits itself credible and lasting “buy-in” for the agreement.

A punishment of Switzerland and a signal to London

Hahn also admits, however, that the phasing out of stock market equivalence will not cause any major disruption to the financial centre. (He maybe discussed this with his mate Susanne Riess…) “We simply cannot accept further attempts of foot-dragging and watering down internal market rules, especially in what is probably the decisive phase regarding Brexit.” Hahn thus explains that he is not concerned with the technical question of the equivalence of stock exchange regulation, but with punishing Switzerland and sending a signal to London.

In December 2017, the then President of the Federal Council, Doris Leuthard, described the behaviour of the EU as “discrimination” and the link between this question and institutional issues as “irrelevant and unacceptable”. The Federal Council doubted the legality of these “discriminatory decisions”. Since this time it is a question of the triangular relationship between Brussels, Bern and London and Switzerland is to a certain extent being turned into a Brexit boy, the illegality is likely to be even more evident.

Published at Tamedia on june 21st, 2019 – there you’ll find the letter in full as PDF: https://www.tagesanzeiger.ch/schweiz/standard/der-unfreundliche-brief/story/10305649

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