Prospects for a treaty setting out Switzerland’s ties to its biggest trading partner faded last month when negotiators could not reach a breakthrough after four years of talks.

The EU has been pressing Switzerland to ease rules that protect high Swiss wages against cross-border competition from skilled labor. Swiss unions are fighting this tooth and nail, leaving the outlook for a treaty deal in doubt.

The Swiss cabinet is due to address the status of talks on Friday, with leaders of all four parties in the coalition expressing scepticism that a deal can emerge this year ahead of elections in both Switzerland and for the European Parliament in 2019.

Brussels has been pressing Switzerland to agree a pact that would sit atop an existing patchwork of 120 sectoral accords and have the Swiss routinely adopt changes to single market rules.

Should treaty talks fail, the sectoral accords would stay in effect, but two-way ties would enter a deep freeze.

Brussels has said it could take punitive measures - including refusing to roll over recognition of Swiss bourse rules beyond the end of 2018 - should the talks fail, a threat that has touched off potential Swiss retaliation.

In a summary of its policy objectives for next year, Switzerland also said it was following Britain’s exit from the EU closely and would prepare proposals on future bilateral ties.

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