EU/SWITZERLAND : SENSITIVE INSTITUTIONAL AND FISCAL ISSUES AHEAD.

The truce between the European Union and Switzerland, dictated by the Swiss general elections in October 2011 and appointment of the members of the new government in mid-December, is over and the Danish EU Presidency will have to manage a potentially explosive situation.

The Union's top priority is to give a strong institutional dimension to bilateralism, the only form of European integration that Switzerland is willing to accept. The EU demands that its myriad of agreements with Berne include more effective mechanisms for surveillance, dispute resolution (given the many disputes between the parties, especially over free movement of people) and adaptation to developments in EU legislation.

The Commission is trying to impose a horizontal model that can be transposed into all agreements, while Switzerland defends a bottom-up' approach. Recently, it proposed to try to work out a solution to the institutional problem in the framework of the negotiations under way on transit and access to the electricity market, with the aim of breaking the stalemate. The agreement could then be adapted to other sectors.

Electricity is one of the themes in the pipeline for the third round of bilateral negotiations between the EU and Switzerland, as Berne defends a "comprehensive and coordinated" approach in its relations with the EU.

Talks have already started in other areas, such as free trade in agricultural goods, cooperation in the area of competition, satellite navigation and CO2 emissions trading, or will be launched in 2012 (safety of chemicals, renewal of the Swiss financial contribution - nearly 1...