For members


EXPLAINED: Why is Switzerland not part of the European Union?

In the world of multilateral pacts, Switzerland continues to eschew many international alliances. This is why.

EXPLAINED: Why is Switzerland not part of the European Union?
Proudly independent, Switzerland is not expected to join the EU. Photo by Fabrice Coffrini / AFP

To date, Switzerland is one of only a handful of western European nations that have not joined the European Union.

Bordered on all sides by member states (except for tiny Liechtenstein), Switzerland has often been referred to as a little rich island standing alone in the middle of Europe.

A phrase “Swiss paradox” has also been used to describe the country’s steadfast refusal to join the Union. That’s because Switzerland’s economy relies heavily on exports and its main trading partner is the EU.

Another paradox is that about one-quarter of Switzerland’s population are foreigners — most of them from the EU. 

Blame it on neutrality

“Switzerland  has a very strong sense of independence; joining the EU would impinge on its autonomy”, political scientist Daniel Warner, former deputy to the director of The Graduate Institute of International and Development Studies in Geneva, told The Local in an interview.

READ MORE: EXPLAINED: Why is Switzerland always neutral?

In fact, the concept of sovereignty is so deeply entrenched in the Swiss psyche, that the country voted to join the United Nations only in 2002 — another obvious paradox, as Geneva is home to a number of UN organisations and agencies.

This doesn’t mean that attempts to join the EU haven’t been made.

In 1992, Swiss voters narrowly rejected (by 50.3 percent) the government-backed plan to join what was then the European Economic Area of 12 nations.

The main argument that swayed the voters was that the country’s unique grass-roots democracy would be undermined if political decisions affecting Switzerland would be made in Brussels rather than in Bern.

Nearly a decade later, in 2001, Swiss citizens voted on a popular initiative to open membership negotiations, but nearly 77 percent rejected the proposal.

Small concessions

Realising that some kind of relationship with the EU would be beneficial to the country’s trade-based economy, Switzerland gradually negotiated 120 bilateral agreements with Brussels.

These treaties include market access for Swiss exports, scientific research, student exchanges, police cooperation, as well as belonging to the Schengen Area, which provides for the free and unrestricted movement of people among member states.

Switzerland is also part of another non-EU member group — European Free Trade Association (EFTA) — which gives Switzerland and three other members (Norway, Iceland and Liechtenstein) access to some trade and economic perks within the association and the EU.

Love-hate relationship

While the bilateral arrangement with the Union has been mutually beneficial, cracks appeared in May 2021, when Switzerland ended framework agreement negotiations with Brussels. These talks were aimed at rejigging five major pacts, and fine-tuning applicable Swiss and EU laws.

However, the Federal Council “concluded that there remain substantial differences between Switzerland and the EU on key aspects,” and ended the talks.

The two sides hit an impasse after the EU refused to budge on demands from Swiss president Guy Parmelin to exclude key issues relating to state aid, wage protections and freedom of movement from the pact.

“The Federal Council nevertheless considers it to be in the shared interest of Switzerland and the EU to safeguard their well-established cooperation and to systematically maintain the agreements already in force,” the government said.

“It therefore wishes to launch a political dialogue with the EU on continued cooperation”, he added.

READ MORE: EXPLAINED: Why did Switzerland call off EU talks and what are the consequences?

Is Switzerland likely to join the EU in the foreseeable future?

Not according to Warner.

“There is only a limited desire for membership”, he explained, mainly due to very strong anti-EU sentiments in the central part of Switzerland — primarily in rural areas — where most  supporters of the right-wing Swiss People’s Party (SVP) live.

The SVP has staunchly opposed any moves to join the EU.

“Switzerland’s exceptional success in terms of prosperity, peace and social balance can be explained only by the pillars of this state, which are called direct democracy, federalism and armed neutrality. All of this would be threatened by the EU membership agreement. This contract would allow the EU to impose its rules in the areas of free movement of people, agricultural policy, industrial standards, energy supply and even north-south transit routes”, the party claims.

“This mentality is still prevalent”, Warner said.

So in terms of Switzerland joining the EU, “I don’t see it happening”, he added.

Member comments

  1. Britain looks at Switerland as an example for not being in the EU and like Switzerland we see London as a banking hub for the world’s rich, being part of the EU would mean losing a bit sovereignty when it comes to dealing with these bankers, for this reason both Switerland and Britain feel better outside the internal market.

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For members


What you should know about Switzerland’s banking secrecy

The mere mention of banking secrecy in Switzerland conjures up images of anonymous accounts and illicit cash hidden in vaults. But the reality is quite different.

What you should know about Switzerland's banking secrecy

Swiss bankers have a long reputation of being tight-lipped when it comes to divulging details about their clients’ accounts.

Over the years, however, this practice has become associated with illegal activities ranging from money laundering to tax evasion, which have tarnished Switzerland’s image, earning it the name of a ‘tax haven’ or ‘tax paradise’ where wealthy people stash their undeclared assets.

READ ALSO: Is Switzerland actually a tax haven?

However, under pressure from other countries, Switzerland adopted a tougher stance on foreign account holders in 2016, exchanging information with its foreign counterparts to ensure tax transparency.

This means that a foreign individual, whether residing in Switzerland or abroad, can no longer hide assets in a Swiss bank and hope their own country wouldn’t find out about it.

So, as far as foreigners are concerned, the days of bank secrecy are long gone.

But this practice is still intact for Swiss clients.

‘Client confidentiality’

Rather than calling this practice ‘banking secrecy’, the Swiss refer to it as ‘client confidentiality,” which has long-standing legal basis.

According to the government, this legislation “protects the financial privacy of citizens from unauthorised access by third parties or by the State.”

This is how the government explains it: “Banking secrecy arises from civil law, especially the contractual obligation of the banker to keep the personal information of his or her client confidential. The privacy of the client is also protected by the general provisions of the Swiss Civil Code concerning protection of personality and by the law on data protection. Moreover, under civil law, banking legislation considers the confidentiality of the banker to be a professional obligation, the violation of which is punishable.”

In other words, the bank not only must keep information about its Swiss accounts confidential, but could actually be punished if it divulges it.

OPINION: Switzerland’s respect for privacy has benefits but it also harms the country

Challenges to the law

Some Swiss politicians are speaking out against this long-standing practice.

“Now is the time to abolish banking secrecy in Switzerland,” according to Tobias Vögeli, president of the Young Green Liberals.

He argues that changing the law requiring banks to maintain confidentiality about their clients’ financial affairs would be “an effective instrument against tax evasion.”

His party will file a motion in the parliament to this effect in the near future.

However, this drastic change is not likely to happen — not only have some MPs already voiced their opposition to it — but the law provides for exemptions to bank secrecy.

“Numerous provisions of civil law, debt collection and bankruptcy law, criminal law, administrative criminal law, and mutual assistance in criminal matters provide for exceptions to banking secrecy,” the government says.

Accordingly, it can be lifted against the client’s will if ordered by court: “The Swiss financial center has comprehensive mechanisms at its disposal to defend against assets originating from criminal offenses. By international standards, the Swiss rules are very strict.»

In conclusion, if you are a Swiss citizen, your right to ‘financial privacy’ is guaranteed.

If, on the other hand you are a foreign national, your assets will be declared to your country of origin. 

READ ALSO: What can a Swiss bank demand of a foreign client?