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Swiss are likely to defeat referendum today on joining the EU

GENEVA (AP) — In a masterly demonstration of having its cake and eating it, too, Switzerland is basking in the benefits of the European Union with none of the pain.

Sweeping free-trade agreements reached two years ago with the 15-nation bloc promise Swiss companies vital access to European markets — without obliging the notoriously independent Swiss to cede any of their treasured political sovereignty.

The Swiss economy is booming, with last year's government budget surplus of $2.6 billion a record and consumer confidence at a 12-year high. Inflation and unemployment are only about 2 percent, and foreign companies are flocking to set up headquarters in Switzerland.

Small wonder, then, the Swiss see little value in EU membership. Opinion polls predict more than 60 percent of the 4.5 million voters will say "no" in a referendum today on urging the government to open negotiations without delay to join the union.

"Do we want to lose our freedom, our independence, our direct democracy, our effective armed neutrality and our prosperity — and have to pay out billions for the privilege?" said nationalist politician Christoph Blocher, summing up the opposition.

The government is urging a no-vote, saying it's premature to start membership talks. Although the seven-member Cabinet has repeatedly stated it wants Switzerland to join the EU, it argues that public opinion won't permit that until at least 2010.

"The proposal puts us under unnecessary time pressure and could even jeopardize the government's long-term desire to enter the European Union," Foreign Minister Joseph Deiss said.

The government hasn't forgotten an overwhelming vote against membership in a loose European trading area in 1992. The mistrust of outside interference is so strong that Switzerland isn't even a member of the United Nations.

Government opposition has infuriated the Socialist Party and youth groups that submitted the EU proposal in 1996, having gained the necessary 100,000 signatures under Swiss direct democracy.

"The government is in the process of sealing the isolation of our country," said Stephane Montangero, president of the National Youth Council of Switzerland.

The pro-European lobby argues Switzerland should help formulate EU policies since they affect everyday life and says the go-it-alone stance has left the country vulnerable to attacks over its banking secrecy and wartime past.

Opponents have spoken out forcefully. Ads by the right-wing Swiss People's Party warn that EU membership would double sales tax to 15 percent, increase rents up to 25 percent due to higher interest rates, cut wages and boost unemployment. The annual membership bill of $3 billion-$4 billion would cost each Swiss citizen 1,000 francs ($590), the party claims.

Industry and banks also urge voting no. The Swiss Bankers Association warns of the repercussions for banking secrecy — which the EU already is pressuring Switzerland to curb to help root out tax evasion.

The EU executive commission recently hinted that some member countries may hold up ratification of the bilateral trade accords until Switzerland makes concessions on banking secrecy.

That outraged the Swiss establishment, as did a critical French National Assembly report Feb. 21 which renewed old accusations that Switzerland is a haven for dirty money.

Significantly, industry — which for years clamored for closer links to the EU — agrees on holding off on negotiations given that the bilateral agreements already would give Swiss companies access to European markets.

"EU membership is now a political rather than an economic question," said Dominique Rochat of the Swiss Business Federation.

Even with Switzerland outside the EU, some 500 foreign companies have sought government help to relocate here since 1997 and more have done so independently. The government lists as incentives good transport links, favorable taxes, top schools and research institutes, and a well-educated, multilingual labor force.

The American consumer products giant Procter & Gamble cited a mix of advantages for choosing Geneva for its new marketing headquarters for Europe, Africa and the Middle East.

"Other countries offered lower tax rates, but it was Switzerland that best combined all the favorable factors," said company spokeswoman Irene Bourvene.