Swiss upper house backs immigration bill avoiding EU quotas

By Michael Shields and Gabriela Baczynska ZURICH/BRUSSELS (Reuters) - Swiss efforts to curb immigration from the European Union without provoking a clash with Brussels cleared another hurdle on Thursday when parliament's upper house backed giving locals first crack at open jobs rather than adopting outright quotas. The step is roughly in line with a bill the lower house adopted in September, skirting direct confrontation with the EU which says free movement of people is a key condition for free Swiss access to the bloc's single market of 500 million people. The two bills still must be reconciled ahead of a final vote later this month, but both stop short of upper limits and quotas on immigration that Swiss voters demanded in a binding 2014 referendum. How the EU reacts will be scrutinised for hints of what Britain might expect as it negotiates its exit from the bloc with any potential trade-offs between free trade and free flow of people is shaping up as a key battle line. "What is important for the European Commission is that there is no discrimination between Swiss citizens and EU citizens," a European Commission spokeswoman told a news conference in Brussels. She declined further comment until the final Swiss legislation was in place. Should Brussels determine the final measure infringes too heavily on freedom of movement, it could cancel other bilateral accords which ease Swiss trade with the EU in areas that account for 7 percent of Swiss economic output. Around 8.3 million people live in the neutral Alpine republic, nearly a quarter of them foreign. Many people from EU states Italy, Germany and France go there to work everyday, making the case politically sensitive for their governments. EU officials and diplomats say the Swiss laws are not yet acceptable to them but hope this would change by the end of the year if tweaks are made as the two texts are merged into one. They say giving preference to local workers as such is not against legal agreements between Switzerland and the EU, but the exact wording is key to avoid illegal discrimination. NUCLEAR OPTION UNLIKELY Time is running out and the EU - wary of any effects on the crucial Brexit talks - vows not to budge. But diplomats in Brussels also say the bloc is unlikely to react swiftly even if the Swiss adopted something the EU finds in violation of existing agreements. "Frankly, before the EU states all establish a common position on that and decide together what to do about it, weigh ties with Switzerland and Brexit, then take it back to the Swiss, it's a lot of water under the bridge," one diplomat said. "Who knows where we'll be by then, who knows when and what we'll decide. There are so many problems, this is just not the top priority. No one would rush." In Switzerland, the far-right Swiss People's Party (SVP), the biggest faction in parliament, had argued in vain to translate the 2014 referendum into quotas by February 2017. Upper house member Peter Foehn of the SVP told the debate that net immigration had risen by more than 750,000 since 2007: "When I look at tiny Switzerland that is much too much." Proponents of the compromise immigration package have called it a deal meant to curb the foreign influx without violating free movement rules. They hope the EU will find it tolerable despite the Brexit complication. "The bilateral should not be put at risk," said Philipp Mueller, a lawmaker from the pro-business Free Democrats. In any event, Swiss voters may well be asked again to choose between close ties with its main trading partner and immigration curbs, the government said in October. (Editing by Toby Chopra)