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Accord will face big tests before it is ratified

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Swiss president calls the deal a milestone

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Von der Leyen says such accords are vital in current times

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Swiss annual contribution toward EU will rise

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Accord faces resistance in Switzerland

By Dave Graham, Philip Blenkinsop

BERN/BRUSSELS, Dec 20 (Reuters) -

Switzerland and the European Union on Friday unveiled a deal

to carry out the biggest overhaul of their trade ties in years,

overcoming Swiss concerns about immigration and setting the

scene for a fraught and lengthy approval process.

Covering everything from electricity to state aid, transport

and freedom of movement, plus Bern's financial contribution to

the bloc, the accord drew the EU and its fourth-biggest export

market closer and gave added certainty to Swiss companies that

rely heavily on the 27-nation alliance for business.

Though it faces big tests before ratification, the deal is a

step forward from the last bid, which failed in 2021 when Bern

abruptly pulled out. It also delivers a boost to the EU as it

tries to move past Britain's 2016 vote to exit the bloc.

Swiss President Viola Amherd and the president of the European

Commission, Ursula von der Leyen, announced the agreement at a

hastily-convened joint news conference in Bern.

"Today is a milestone for the stabilization and further

development of bilateral relations," said Amherd, the head of

Switzerland's seven-member executive, the Federal Council.

Von der Leyen described the agreement as "historic" and

vital given geopolitical turmoil.

"In Switzerland as well as in our 27 member states, in this

challenging environment, strong partnerships like ours are not

just an advantage, they're a must," she said.

Beginning in March, the negotiations delved into contentious

areas of sovereignty such as how to resolve disputes where Swiss

and EU law diverge in a bilateral trade relationship worth some

300 billion Swiss francs ($338 billion) annually.

Swiss engineering group ABB hailed the outcome,

which it expects to provide "legal certainty and stability" for

Swiss firms, particularly those oriented towards the EU.

Per capita, Switzerland is wealthier than most countries in

the bloc, which is easily the Alpine nation's top trade partner.

Under the deal, its annual payment towards the EU will stay

at 130 million Swiss francs ($145 million) in a transitional

phase to the end of 2029. Then, from 2030 it will rise to 350

million francs through 2036, the Swiss government said.

Switzerland's economic ties with what is now the EU were

built on a 1972 free trade deal subsequently expanded by

multiple agreements. But those accords have begun to age, with

some expiring as Europe updates its own regulations.

OPPOSITION

At the heart of the negotiations has been agreeing on

so-called "dynamic alignment" of laws, under which Switzerland

is obliged, pending its own constitutional safeguards, to adapt

its legislation to relevant ongoing changes in EU law.

Switzerland secured a mechanism with the EU that could let

it control immigration from the bloc under exceptional

circumstances, subject to a process of joint arbitration.

Opposition to the EU has come on the right from critics

warning about sharp Swiss population growth, and on the left

from trade unions worried about wages coming under pressure.

During a press conference setting out the accords, three

Swiss federal councillors were repeatedly asked to explain how

the immigration curb would work and whether they were

enthusiastic about the deal.

"The Federal Council views stable, predictable relations

with neighbouring countries and the EU as a strategic necessity,

especially in these very turbulent geopolitical times," Swiss

Foreign Minister Ignazio Cassis said.

The new deal must still be approved by the Swiss and

European parliaments and is almost certain to face a public

referendum in Switzerland, where powerful critics are

marshalling their forces to reject it.

European Trade Commissioner Maros Sefcovic said the

agreement will bring benefits to Switzerland on research, health

and air freight, and that it could take effect in 2028 or 2029.

If the agreement is not approved, relations between the two

sides would likely suffer, he said.

"Our cooperation would over the time be smaller, would degrade,

would be more difficult," Sefcovic said.

($1 = 0.8940 Swiss francs)