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Greens make strong election gains, but don’t expect much change

Greens make strong election gains, but don’t expect much change

Green parties have won the legislative elections in Switzerland, but we don’t expect major changes in government policies. Swiss growth is negatively impacted by the global slowdown and uncertainties

Sunday’s parliamentary elections in Switzerland gave Green parties a big breakthrough, as we’ve seen in other European countries, and they’re considered the winners. First, the Green Party (left), obtained 17 additional deputies, with a total of 28 seats (13% of the votes) and they’re now the fourth largest political force in Switzerland. The Green Liberal party (right) jumped to 16 seats with 9 deputies (8% of the vote). The campaign for these legislative elections has been largely marked by the issue of climate change. Swedish activist Greta Thunberg’s calls were particularly resonant in the country where many towns and cities have proclaimed a “climate emergency”. Tens of thousands of people have also participated in climate strikes.

The main political force remains the right-wing populists of the SVP, but they are weakened by losing 12 seats, from 30% of the vote in 2015 to 26% this year. We now need to wait until December 11 for the elected members of both Houses of Parliament to designate the seven ministers to the government. Since the portfolios will be divided among the major parties on the basis of a political consensus, it is unclear whether the Green parties will have ministerial positions or not. Therefore, the impact of the election results on the policy pursued by the Federal Council should not be major.

Tensions between Switzerland and the EU remain
If the Eurosceptic right party lost ground, tensions with the EU are not over yet. The SVP has already proposed a referendum to stop the free movement of people with the EU. This should take place in May 2020, and could have a strong impact on the future relationship between the EU and Switzerland.

Meanwhile, the negotiations for the institutional framework agreement, which must define future relations between the two blocs, are completely stuck. Yet the stakes are high. According to the EU, the institutional framework agreement is the only way to extend the lifespan of the specific relationship between Switzerland and the European Union which is currently regulated by more than 120 bilateral treaties. For the Swiss, it’s more complicated.

The framework agreement involves adaptations of the law in such sensitive areas as wage protection, dispute resolution and state aid. As the EU ruled out any renegotiation of the draft Treaty, the Swiss Federal Council asked for clarification on the sensitivities at the beginning of June 2019. Since then, negotiations have not progressed because it is politically explosive. It was decided to wait for the formation of the new Swiss government and the new European Commission.

The EU, however, hoped to put pressure and accelerate negotiations by not renewing the stock market equivalence of the Swiss Stock Exchange at the end of June. Fearing catastrophic consequences for the Swiss Stock Exchange, safeguard measures have been put in place by the Swiss authorities. Therefore, since 1 July, the shares of companies listed on the Swiss stock exchange are no longer traded on EU stock exchanges and EU investors have to buy and sell these shares via suppliers of the Swiss stock exchange or other trading venues outside the EU.

As a result, the effects of the loss of equivalence on both trading volume and stock prices were very limited. The implementation of this threat, therefore, did not lead to a speeding up of the negotiation process as the EU had hoped but rather tended to strain relations. Uncertainty is therefore complete as to the outcome of the negotiations, which may affect the business climate and trade flows between Switzerland and the EU. Knowing that the EU is Switzerland’s main trading partner (53% of Swiss exports go to the EU and 71% of Swiss imports come from the EU), the prolongation of uncertainties is not great for economic growth in Swiss.