By Michael Shields
ZURICH (Reuters) - Swiss ties with the European Union, its biggest trading partner, face a critical test this week as Brussels decides whether the two sides have made enough progress on a stalled draft treaty to head off punitive measures set to start at the end of June.
After more than four years of negotiations produced a draft text in November, the Swiss government this month tentatively endorsed the accord but said it needed clarifications on three areas -- protecting Swiss wages, regulating state aid, and spelling out citizens' rights -- before it could sign off.
European Commission President Jean-Claude Juncker -- whose term ends on Oct. 31 -- responded that he was prepared to clear up any questions but wanted this done by Tuesday, when the Commission reviews relations with Switzerland.
The Commission's main leverage is its recognition of Swiss stock exchanges as equivalent to EU bourses, which allows them to access the bloc's single market and which is due to expire at the end of June.
Finding language to address Swiss concerns on state aid and the rights of EU citizens living in Switzerland -- but without reopening the draft accord for renegotiation -- does not look insurmountable, people close to the situation say.
But tackling Swiss measures to protect Europe's highest wages from EU workers crossing the border on cheaper temporary assignments -- a main bone of contention for a decade -- looks like a harder nut to crack.
The head of the Swiss SGB labor union federation, Pierre-Yves Maillard, stuck to a hard line, telling the SonntagsZeitung paper it would be impossible to find a solution by autumn.
"The government can speak to Brussels in the weeks ahead and discuss a treaty, but there is no basis at present to find a concrete solution or even wrap up a treaty," he added.
Complicating matters are Swiss parliamentary elections on Oct. 20, with mainstream parties loath to hand the anti-EU Swiss People's Party (SVP) a treaty deal that the SVP could use as a stick with which to beat the three other coalition members.