Swiss `No' Vote Raises Doubts Over Europe

BY voting down Switzerland's participation in a 19-nation European free-trade zone Sunday, Swiss voters have placed a large question mark over their economic future - and raised new doubts about European unity at the same time.

The voters rejected, by 50.3 percent, an accord between the 12-nation European Community (EC) and the seven-nation European Free Trade Association (EFTA) creating a barrier-free market of 380 million consumers.

Although the defeat in the popular vote was slim, Swiss law also required ratification by a majority of the country's 23 cantons, and there the margin was greater. Only seven cantons, all along or near the French border, voted to ratify the European Economic Area (EEA). Preserving local control

The result reveals an isolationist Switzerland worried about losing its identity within Europe, a nation determined to preserve local control and decisionmaking as its neighbors move toward coordinated action.

The irony is that Switzerland, confronting for the first time in recent history such more traditionally European ills as unemployment and inflation, has also turned down the hand that feeds it. The EC and EFTA absorb more than two-thirds of the high-value-added exports that have made the Swiss among the world's wealthiest people.

"We have cut ourselves off from Europe and we are going to find ourselves progressively discriminated against by our economic partners," said Economic Minister Jean-Pascal Delamuraz. Speaking shortly after the vote, he labelled the result "black Sunday for the economy, for supporters of greater openness, and for our youth [who have been] denied a future."

Switzerland is a member of the EFTA and has applied for EC membership. Sunday's vote appears to doom the EC application, at least for now, although the country's pro-Europe leadership refused to withdraw the application after the vote. Regional divisions

Perhaps most troubling for Switzerland's future is the vote's split along linguistic lines. French-speaking cantons voted yes, while the more conservative cantons of German-speaking "Inner Switzerland" voted no.

Talk of separatism among the Swiss - a taboo subject only a few months ago - will build, observers say, placing Switzerland with such neighbors as Italy and Belgium, where linguistic and cultural divisions are gaining ground.

The Swiss vote will delay the EEA's implementation, which was to take effect on Jan. 1 simultaneously with the EC's single market.

Although the agreement anticipated the possibility of rejection by an EFTA member, the necessary changes could take six months to approve.

Not all the changes are simple formalities. The touchy issue of financing will come up as EC and EFTA countries wrangle over how to make up Switzerland's share of a new $1 billion fund to help Europe's poorer countries offset exposure to EFTA's wealthier and more efficient members.

Switzerland was to contribute 27 percent of the $1 billion fund over five years.

Like Denmark's June vote against the EC's Maastricht Treaty for economic and political union, Switzerland's anti-EEA results revealed a deep schism between Swiss voters and the country's political leadership and economic elite.

Speaking at a post-vote press conference, the Swiss Confederation's President Rene Felber lamented the emergence of a "Switzerland cut in two" in more ways than one.

Virtually repeating the official post-referendum analysis in Denmark and even in France, where a stunningly thin majority approved the Maastricht Treaty in a September referendum, Mr. Felber acknowledged "the rupture between the government, the parliament, economic circles, and on the other hand the people."

Economic leaders consistently warned that a "no" vote would lead to a direct reduction in industrial investments in Switzerland and to relocation of operations outside the country.

Several chemical, pharmaceutical, and machine manufacturers warned of projects that risked being moved to another European country if the Swiss rejected participation in the EEA, where customs will vanish and product norms will facilitate trade. Hewlett-Packard's European management had warned that it would be difficult to justify a European headquarters in Geneva in the event of a vote against the European market. `Economic scare tactics'

But voters rejected what they considered "economic scare tactics" - even Zurich, the world's fourth-largest financial center, voted down the referendum. And many acted on concerns, especially widespread among the German-speaking majority, that include fears of a remote, bureaucratic despotism from EC head- quarters in Brussels, and of domination by the giant German neighbor to the north.

Many observers emphasize that simply voting down participation in Europe will not remove Switzerland from the forces bearing down on it as a result of profound change across Europe.

As analyst Rene Schwok notes in a recent work on Switzerland and Europe, the glue that sticks Switzerland together is not linguistic, cultural, religious, or based on a strong central power. "[Swiss] cohesion results from nothing other than a consensus on federalism, direct democracy, and neutrality," he writes, "values that are themselves shaken by the process of European integration."