ZURICH, Nov 28 (Reuters) - Four years of negotiations have failed to yield a breakthrough on a new treaty between Switzerland and the European Union, by far its biggest trading partner.
The Swiss cabinet is due to address the situation on Friday. Leaders doubt that any proposed treaty could win the backing of parliament or from voters in a referendum under the Swiss system of direct democracy.
Failure of the talks could send shock waves through Switzerland that go far beyond a diplomatic deep freeze.
Brussels has threatened not to extend beyond this year recognition of Swiss exchange regulation that allows cross-border trading, depriving the SIX Swiss Exchange of EU-based business that generates more than half its volume.
The Swiss government is preparing countermeasures designed to bring trading of Swiss stocks back to Switzerland from EU bourses. Bern would ban EU bourses from hosting trading of Swiss stocks, exposing EU bourse officials to punitive measures if they did not comply.
The tit-for-tat escalation could disrupt financial flows, making it "significantly harder" to launch initial public offerings of shares in Switzerland given the absence of demand from the EU, one Swiss official said.
Swiss Energy Minister Doris Leuthard has lobbied for a deal that would create an electricity union with the EU, fostering cross-border flows and ensuring power supplies to Switzerland in emergencies.
But the EU has said the Swiss will get no new access to its single market without a new treaty, scuppering chances for a new power bloc.
The 120 sectoral accords that now govern ties include a pact on mutual recognition of industrial standards that need to get updated as new rules take effect.
Swiss officials have cited medical technology as an exposed sector. It employs around 58,500 people and generated sales of 15.8 billion Swiss francs ($15.8 billion) last year.
"If the mutual recognition agreement or the equivalency fails, we in industry would have to deal with significant custom requirements again and all of the associated costs," said Matthias Buerger, vice president for global regulatory affairs at Zimmer Biomet, which makes replacement joints and spinal implants in Winterthur.
"It's definitely not something we would want to happen, but it's less of a reason to panic than a hard Brexit," he told Reuters.
Switzerland could lose access to the EU's Horizon Europe programme, which starts in 2021 and funds research and innovation. Brussels temporarily blocked Switzerland from the current Horizon 2020 programme, hurting Swiss research, after Swiss voters in 2014 approved a referendum campaign to curb immigration from the EU despite accords ensuring the free movement of people.
($1 = 0.9996 Swiss francs) (Editing by Larry King)