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UPDATE 1-Brussels blocks Swiss bourses' access to EU market

Francesco Guarascio

(Adds Swiss comments, background)

BRUSSELS, June 21 (Reuters) - The European Commission will not propose extending the equivalence regime that allows Swiss stock exchanges direct access to EU investors, effectively ending it as of July 1, an EU diplomat told Reuters on Friday.

Friday is the deadline for the Commission to make such a proposal, but it will refrain from doing so because Bern did not endorse a partnership treaty with the EU that had been under negotiation for years, the diplomat said.

Bern's request this month for "clarifications" on three areas -- protecting wages, regulating state aid and defining the rights of EU citizens in Switzerland -- are seen in Brussels as demands to reopen the treaty text, which the EU refuses to do.

Granting stock market equivalence is the EU's major leverage in trying to get the Swiss to finally sign off on the pact, but Switzerland's foreign minister has said repeatedly that Bern will not be rushed into any deal although it remains open for talks.

In Bern, a government spokesman had told reporters the cabinet had taken no new decisions on the EU dossier, reiterating its position that it would reactivate countermeasures to ban trading of Swiss stocks on EU exchanges in response to any such action by the EU. (Reporting by Francesco Guarascio; Editing by Kevin Liffey; zfraguarascio)