Swiss minister pessimistic on swift EU treaty

Swiss Economy Minister Guy Parmelin said the EU would weaken itself if it no longer cooperated with Switzerland on research. (AFP/File)
Updated 01 September 2019

Swiss minister pessimistic on swift EU treaty

  • The Swiss retaliated by banning EU venues from hosting Swiss stock trading

ZURICH: Switzerland is unlikely to strike a deal with the EU this year over a stalled partnership treaty, its economy minister said, extending an impasse that has hurt bilateral ties and disrupted cross-border share trading.

European Commission President Jean-Claude Juncker has urged Bern to wrap up the accord before his term ends on Oct. 31, when German politician Ursula von der Leyen is set to replace him.

The Swiss government has also said it would like to clinch a deal by then if three final points can be clarified.

Economy Minister Guy Parmelin, however, told the SonntagsZeitung newspaper that he was pessimistic, given that representatives of Swiss labor, employers and cantons had been unable to find common ground Switzerland could use in the talks. “We want a good solution that can win majority support, and that is not the case at the moment,” said Parmelin, a member of the right-wing and euroskeptic Swiss People’s Party.

“I don’t think we can wrap up this year. Our agenda and that of the EU allow a conclusion only next year at the earliest,” he said, citing Swiss elections in October, the creation of a new European Commission team and a Swiss referendum due next year on abolishing free movement of EU citizens.

Brussels blocked EU-based investors from trading on Swiss exchanges from July 1 as the row escalated over the treaty under which non-member Switzerland would routinely adopt the EU single market rules. The Swiss retaliated by banning EU venues from hosting Swiss stock trading.

In Bern, resistance to the treaty — negotiated over 4-1/2 years and Switzerland’s top foreign policy issue — encompasses the normally pro-Europe center-left to the anti-EU far right, which both see the pact infringing on Swiss sovereignty.

Failure to secure a treaty deal with its biggest trading partner means Switzerland gets no new access to the single market, its crucial export outlet. The partners have 120 bilateral economic accords that would stay in place but erode over time when they are not updated. Research cooperation could also stop.

“I think the EU would weaken itself if it no longer cooperated with Switzerland on research,” Parmelin said. “We are then forced to seek alternatives, perhaps along with Britain, if the EU remains dogmatic.”

Parmelin played down a Swiss media report that he would urge post-Brexit Britain to join the European Free Trade Association (EFTA), which groups together Switzerland, Iceland, Liechtenstein and Norway. 

He said some Swiss politicians liked the idea but the Swiss Cabinet had not discussed it.

“I have not heard that this is needed by Britain. If Britons want that, we will review it, but I believe it would be risky,” he said.

“Given its size, Britain would dominate the rest of EFTA.”


Oil-rich wealth funds seen shedding up to $225 billion in stocks

Updated 30 March 2020

Oil-rich wealth funds seen shedding up to $225 billion in stocks

  • Risking more losses is not an option for some funds from oil-producing nations

LONDON: Sovereign wealth funds from oil-producing countries mainly in the Middle East and Africa are on course to dump up to $225 billion in equities, a senior banker estimates, as plummeting oil prices and the coronavirus pandemic hit state finances.

The rapid spread of the virus has ravaged the global economy, sending markets into a tailspin and costing both oil and non-oil based sovereign wealth funds around $1 trillion in equity losses, according to JPMorgan strategist Nikolaos Panigirtzoglou.

His estimates are based on data from sovereign wealth funds and figures from the Sovereign Wealth Fund Institute, a research group.

Sticking with equity investments and risking more losses is not an option for some funds from oil-producing nations. Their governments are facing a financial double-whammy — falling revenues due to the spiraling oil price and rocketing spending as administrations rush out emergency budgets.

Around $100-$150 billion in stocks have likely been offloaded by oil-producer sovereign wealth funds, excluding Norway’s fund, in recent weeks, Panigirtzoglou said, and a further $50-$75 billion will likely be sold in the coming months.

“It makes sense for sovereign funds to frontload their selling, as you don’t want to be selling your assets at a later stage when it is more likely to have distressed valuations,” he said.

Most oil-based funds are required to keep substantial cash-buffers in place in case a collapse in oil prices triggers a request from the government for funding.

A source at an oil-based sovereign fund said it had been gradually raising its liquidity position since oil prices began drifting lower from their most recent peak above $70 a barrel in October 2018.

In addition to the cash reserves, additional liquidity was typically drawn firstly from short-term money market instruments like treasury bills and then from passively invested equity as a last resort, the source said.

It’s generally a similar trend for other funds.

“Our investor flows broadly show more resilience than market pricing would suggest,” said Elliot Hentov, head of policy research at State Street Global Advisers. “There has been a shift toward cash since the crisis started, but it’s not a panic move but rather gradual.”

The sovereign fund source said the fund had made adjustments to its actively managed equity investments due to the market rout, both to stem losses and position for the recovery, when it comes.

Exactly how much sovereign wealth funds invest and with whom remain undisclosed. Many don’t even report the value of the assets they manage.

On Thursday, the Norwegian sovereign wealth fund said it had lost $124 billion so far this year as equity markets sunk but its outgoing CEO Yngve Slyngstad said it would, at some point, start buying stocks to get its portfolio back to its target equity allocation of 70 percent from 65 percent currently.

Slyngstad also said that any fiscal spending by the government this year would be financed by selling bonds in its portfolio.