Swiss voters on February 9th supported an initiative to reintroduce quotas on immigrants from the EU in a move that has already led to retaliation from the 28-country bloc.

“Limiting immigration is likely to affect the country's growth potential, wealth and overall economic strength,” Moody’s said, noting that the effect of the vote was “credit negative”.

The agency noted that Switzerland has benefited over the past decade from the “strong inflow of highly qualified workers”.

Moody's said it believes that this has “helped mitigate the adverse effects of population ageing and skilled labour shortages, thereby positively contributing to employment and economic growth.”

It said that immigration curbs would also have an adverse impact on the “asset quality” of Swiss banks and potentially on their capitalization.

The quotas “could reduce housing demand, thereby exerting pressure on residential house prices, and potentially leading to a faster-than-anticipated slowdown in residential housing markets,” Moody’s global credit research department said.

“In addition, negative repercussions on Swiss-EU trade may put pressure on export-oriented businesses, thereby leading to weaker corporate asset quality.”

Moody’s added that the degree of impact of the immigration initiative would depend on how it is implemented over the next three years.

The actual level of quotas was not determined in the initiative and it will be up to the government to establish this.

So far the reaction of investors to the immigration vote has been muted.

The Swiss franc has actually strengthened against the euro (trading at 0.81837 cents late Tuesday) since the referendum results were announced and UBS is predicting strong economic growth for the country of 2.1 percent for this year.

Switzerland’s key SMI stock index, meanwhile, has risen since the vote.

The federal government has emphasized that the freedom of movement agreement with the EU remains in effect until a new system is put in place.

But the EU has responded by freezing research grants to Swiss universities and funding for the Erasmus student exchange program.

It has also suspended talks on electricity exports.

Moody’s warned that “if there are strictly binding limitations on (Swiss) immigration that dismiss existing bilateral agreements, current trade facilitations between Switzerland and the EU could be partially withdrawn".

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