BERN (Reuters) - Switzerland has abandoned hopes of reaching an agreement with the European Union on a new treaty this month, frustrated by its inability to forge domestic consensus on how to its approach its biggest foreign policy issue.
Officials involved in the matter say informal talks continue and a window for an agreement remains open until mid-2020 because neither side wants to declare the treaty dead.
But Swiss domestic squabbling have undermined efforts to strike a deal. The Swiss are divided over EU demands that they dilute rules protecting their wages, the highest in Europe, from cross-border competition by EU workers on temporary assignments.
A Swiss referendum that could come in May on ending the free movement of people from the EU -- Switzerland’s “Brexit moment” -- discourages bold action.
And then there is Brexit itself. No Swiss-EU accord will emerge until Britain’s chaotic departure from the bloc is settled, because Brussels has been loath to give the Swiss concessions that Britain might seize on, the officials say.
The logjam is intact before Swiss parliamentary elections on Oct. 20 and a new European Commission headed by Germany’s Ursula von der Leyen takes office at the start of next month.
Progress on the treaty stalled last year after more than four years of negotiations. The terms of the proposed agreement called for Switzerland to routinely adopt the rules of the EU single market -- vital for the export-reliant Swiss economy -- and provide a more effective way to resolve disputes.
It ran aground amid opposition that spanned the normally pro-Europe centre-left to the anti-EU far right. Critics say the treaty infringes Swiss sovereignty to the extent that it would never get through parliament or pass a referendum under Switzerland’s direct democracy.
President Ueli Mauer of the far-right Swiss People’s Party is seeking to meet von der Leyen, whom he knows from when both were defence ministers of their neighbouring countries.
But without a commitment from Maurer’s cabinet colleagues to press ahead, a summit would bear little fruit while the clock ticks toward more retaliatory steps from Brussels.
Dismayed by Swiss foot-dragging, the European Commission has already barred EU-based investors from trading on Swiss stock exchanges -- a measure the Swiss circumvented by outlawing the trading of Swiss shares on EU markets.
The EU might also retaliate by making it harder next year for Swiss-made medical devices to be sold in the EU, or by freezing Swiss academics out of the Horizon research programme.
Unlike Britain, Switzerland has a patchwork of sectoral accords with the EU that remain in place even if the treaty talks fail. But they will gradually lose relevance as EU rules evolve, slowly eroding Swiss access to the single market.
Reporting by Michael Shields, editing by Larry King
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