Switzerland managed to dodge another spat with the European Union that could have hurt the economy after voters rejected a contentious initiative to deport foreigners convicted of crimes.
The electorate turned down the so-called enforcement initiative on Sunday that would have contravened a treaty with the EU and in turn harmed a relationship already strained by a 2014 referendum to limit the number of newcomers to Switzerland.
“It’s great that things aren’t going to be worse,” said Thomas Schaeubli, political risk analyst at Wellershoff & Partners Ltd. in Zurich. “But it doesn’t mean that all the problems are off the table yet — we still have big challenges. The discussion about direct democracy making the country a worse rather than better place to do business, that won’t go away either.”
Switzerland’s system of plebiscites has in recent years brought forth referendums that have made life more difficult for the government. Swiss voters have backed measures imposing strict limits on executive pay and on curbing the number of immigrants. This has raised the question if the country may lose its draw for companies, despite low taxes.
Rejection of the enforcement initiative shows that “Switzerland isn’t morphing into a banana republic marred by internal disagreements,” said Michael Hermann, a political scientist who heads Zurich-based research institute Sotomo. “The historic virtue of moderation is still alive.”
By requiring the automatic expulsion not only of foreigners found guilty of crimes such as murder but also those with a prior criminal record convicted of lesser offenses, the Feb. 28 initiative was incompatible with a bilateral agreement with the EU and could have added to the strain in relations.
The Swiss economy is already in a weakened state due to the strong franc, which caused exports to suffer last year. Data on fourth-quarter gross domestic product is due on Wednesday, with economists forecasting a quarterly growth rate of 0.2 percent. A nullification of Switzerland’s treaty with the EU would hit output by about 32 billion francs ($32 billion) a year, according to government estimates.
The EU is Switzerland’s top trading partner, with 109 billion francs of exports going there in 2015. It’s also a major source of foreign direct investment in Switzerland.
Swiss ties with the 28-country bloc took a turn for the worse two years ago after voters approved new immigration limits for EU citizens. That’s at odds with the treaty, which touches on everything from the free movement of persons and agriculture to civil aviation.
The government is expected to announce further details on implementing that referendum in early March. Whether the EU, already contending with a pending U.K. plebiscite on membership, will acquiesce to Switzerland’s proposed curbs remains to be seen.
“The biggest problem is the mass immigration initiative — it remains open and we have to see what happens,” said Andreas Ladner, professor of political science at the University of Lausanne. “The government has been tasked to implement it and the EU has given the signal they’re not keen on giving Switzerland any special treatment.”