After immigration vote, Swiss have to rework Croatia labor deal

ZURICH Sun Feb 16, 2014 10:39am EST

The Swiss Federal Palace (Bundeshaus) is pictured in front of the Alps in Bern February 12, 2014. REUTERS/Thomas Hodel

The Swiss Federal Palace (Bundeshaus) is pictured in front of the Alps in Bern February 12, 2014.

Credit: Reuters/Thomas Hodel

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ZURICH (Reuters) - Switzerland has told the newest European Union member, Croatia, that it will not be able to sign a labor market pact as planned on July 1, following a shock referendum vote in favor of immigration curbs.

The pact is the second casualty of last week's narrow vote to curtail immigration from the EU, after talks on a cross-border electricity agreement between the bloc and Switzerland were put on hold this week.

"The agreement with Croatia cannot be signed in the form that was agreed on due to the new constitutional provision provided by the February 9 vote," government spokesman Philipp Schwander said on Sunday.

He said Switzerland was still keen to seal the deal with Croatia in a way that took the vote into account and did not discriminate against Croatian workers.

The referendum, backed by the right-wing Swiss People's Party (SVP), has sent Swiss diplomats scrambling to contain the damage in Brussels, as officials there warn of "serious consequences" for Swiss ties with the EU.

Free movement of labor is one of the EU's fundamental principles and EU officials have told Switzerland it cannot cherry-pick the benefits of market access without accepting the obligations it entails.

Justice Minister Simonetta Sommaruga is in Austria for a previously planned trip on Monday, while Foreign Minister Didier Burkhalter flies to Berlin to meet German chancellor Angela Merkel on Tuesday.

Though both sides appear eager to maintain their trade relations, Switzerland has more to lose, in the shape of privileged access to a single EU market of 500 million people.

Swiss weekend newspapers were full of suggestions for what to do next, including calls by the Socialist Party for a new vote.

Swiss business leaders say they are increasingly concerned about other popular votes coming up, including one on May 18 to install the world's highest minimum wage, 22 Swiss francs ($24.17) an hour. Another, set for late in the year, seeks to cap population growth through immigration at 0.2 percent a year.

(Reporting By Katharina Bart; Editing by Kevin Liffey)

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