Swiss right win may hit EU ties

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GENEVA, Oct 22 (Reuters) Switzerland's recently growing links with the 27-nation European Union today appeared likely to be a prime victim of the country's weekend election victory by the right-wing People's Party (SVP).

But analysts said the outcome of the vote, in which the populist SVP boosted its share of the poll to 29 per cent from 26 percent four years ago, would not seriously rock the stability of the Swiss political system.

''At a time of disappearing borders, people are more than ever concerned about losing their identity and control over their lives,'' Yves Nidegger, lawyer and rising star in the SVP's western Swiss wing, the UDC, told a news conference.

The Swiss, he said, saw any deeper involvement with the EU -- favoured by other political parties -- as threatening their direct democracy which provides for national referendums on any measure or law which arouses strong controversy.

That view was voiced with greater force as results came in on Sunday by SVP president Ueli Maurer, who said the outcome of the poll means that the question of EU membership ''should disappear from the last brain now''.

In particular, it seems Brussels will get short shrift in its battle over low corporate taxation with its small neighbour but one of its most important trading partners.

Opposition to closer EU ties, together with calls for lower taxes, and a tough line on immigration and law and order, were at the centre of the SVP's campaign under its charismatic leader, self-made businessman Christoph Blocher.

That approach paid off and the SVP strengthened its position as the biggest group in parliament, and the major force in the left-centre-right coalition government, with the best performance of any Swiss party in nearly 90 years.

NO EARTHQUAKE But, said Lausanne University politics professor Yannis Papadopolous: ''There has been no earthquake.'' Because of the way Switzerland's ''concordance'' system operates, all four parties in the government remained ''condemned to work together'', he said.

However, there seemed little doubt that the SVP/UDC will be better placed to head off any further tightening of links with Brussels after Swiss voters accepted in recent referendums more cross-border police cooperation and employment rights for citizens from new EU member states.

In another vote yesterday, eurosceptical Poland -- a member of the EU since 2004 -- ousted a government seen in Brussels as a troublemaker and gave a strong mandate to a party pledging to put the country back into the EU mainstream.

Switzerland enjoys access to the EU market through a series of agreements made since in 1992 when its voters declined to join the European Economic Area that now links the EU with Norway, Iceland and Liechtenstein.

The access has obliged Switzerland to make compromises. For instance, as the price for retaining its banking secrecy it introduced a tax in 2005 on the savings of non-resident EU citizens, the bulk of which is remitted to EU member states.

In the most recent dispute, Brussels has accused Switzerland of breaching the free-trade agreement because of low corporate taxes levied by some of the Alpine state's 26 cantons under its deeply devolved form of federalism.

According to a report by KPMG, the average corporate tax rate in Switzerland is 21 per cent. But in Obwalden it is 13.1 per cent, and 16.4 per cent in Zug, near Zurich. That compares with 38.3 per cent in Germany and 33.3 per cent in France.

Some companies, such as Kraft Foods of the United States, have relocated to the low-tax cantons from the EU, allowing them to minimise the tax they pay in big European markets like France and Germany.

Reuters AE DB2321

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