Switzerland and the EU: A New Chapter in Bilateral Relations

Muharem Rusiti

October 2025

Switzerland’s relationship with the European Union has always been a balancing act – cautious, pragmatic, and designed to preserve autonomy while sustaining prosperity. That balancing act has now entered a new stage with the so-called Bilateral III agreements, otherwise known as the “Stabilization and Development of Relations between Switzerland and the EU” package, approved by the Swiss government in June 2025 and under domestic consultation in Bern until the end of October 2025.

The path to this point has been long and complex. After rejecting membership in the European Economic Area in 1992, Switzerland pursued sectoral integration – first with Bilateral I in 1999, then Bilateral II in 2004. In 2021, the Swiss government decided not to proceed with a broader institutional framework agreement that had been long under negotiation – a choice shaped by domestic opposition — and relations inevitably reached an impasse. But a political roadmap agreed between Switzerland and the EU in late 2023 reopened the door, paving the way for formal talks in March 2024 and a political agreement in December of that year.

What emerged is not a sweeping framework but a carefully woven patchwork of sectoral arrangements. Bilateral III updates existing market-access agreements – from free movement of people to mutual recognition of standards and transport – while adding new accords on electricity and food safety. It also re-establishes Swiss participation in Horizon Europe, Erasmus+, and Digital Europe, while introducing state-aid rules and a predictable Swiss financial contribution to EU cohesion.

Every element of the package reflects a careful political compromise. Brussels secured dynamic alignment, dispute-settlement mechanisms, and state-aid disciplines, while Bern preserved key exceptions on wage protection and gained arbitration channels for disputes over safeguard measures on free movement. That compromise mirrors Switzerland’s domestic landscape: labor unions remain wary of wage pressure, while business groups prize stability and renewed access to research programs.

The importance of Bilateral III lies not only in its impact on Switzerland, but also in what it signals for Europe’s wider external relations. The package is pragmatic, flexible, and modular, providing for early involvement in EU decision-shaping and proportionality in corrective measures. For governments beyond the Union’s borders – from neighboring states to strategic global partners – the Swiss arrangement demonstrates that engagement with the EU need not be one-size-fits-all. With trust, regulatory discipline, and reciprocity, cooperation can be tailored to specific political and economic realities.

Still, the Swiss model is not easily replicated. Switzerland’s deep economic ties to the EU and long tradition of sectoral alignment make it uniquely suited to this kind of bespoke architecture. For others, sovereignty concerns or existing institutional structures may pose greater hurdles. Yet the example underscores that the EU is capable of pragmatism when dealing with reliable partners.

For Bern, the challenge is now one of persuasion. Domestic ratification will determine whether the concessions won can reassure skeptical constituencies that sovereignty remains intact. For Brussels, the test of success will be stability: fewer legal disputes, smoother cooperation, and the assurance that a close neighbor is firmly anchored to the single market on mutually acceptable terms.

Bilateral III is therefore more than a stabilizing mechanism. If carried out with foresight, it could serve not only to consolidate relations between Switzerland and the EU, but also as a discreet yet influential model for how Europe manages its neighborhood and broader international partnerships – not through rigid uniformity, but through adaptable cooperation that strengthens ties and fosters trust without forcing impossible choices.