ZURICH (Reuters) - Prospects for a new treaty cementing ties between Switzerland and the European Union, its biggest trading partner, appeared to fade on Wednesday as four years of negotiations failed to produce a breakthrough by the EU's mid-October deadline.
The talks are complicated by Britain's separate negotiations on divorce terms from the European Union, with the Commission loath to be too soft on the Swiss for fear of providing ammunition to Brexiteers.
"I can honestly say I find it difficult to believe that the government will be able to present by year's end a solution to all the open questions," Petra Goessi, leader of the pro-business Liberals party in the four-party cabinet, told the Neue Zuercher Zeitung paper.
"Switzerland is not yet ready" for a treaty, she added in an interview published on Wednesday.
Swiss labour rules to protect high wages from cross-border competition have been a major bone of contention with Brussels, which has been pushing to wrap up an accord by year-end.
Talks seemed deadlocked after a meeting of top negotiators in Brussels on Tuesday.
"Some progress was made but we saw no breakthrough. Major political issues remain open. It is in this light that the European Commission will now have to assess at political level how to proceed," a Commision spokeswoman said.
Brussels has been heaping pressure on non-member 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.
It would focus on five areas linked to the single market: the free movement of people, civil aviation, land transport, mutual recognition of industrial standards and processed farm goods.
The treaty would also provide a more effective platform to resolve disputes, providing greater legal certainty.
Should treaty talks fail, and time is short ahead of elections in Switzerland and for the European Parliament both due next year, the sectoral accords would stay in effect, but two-way ties would enter a deep freeze.
Failure to strike a deal would mean no increase in Swiss access to the single market, dashing hopes for a new electricity union. It could also endanger unfettered EU market access for Swiss makers of products such as medical devices, if pacts on mutual recognition of standards lapse.
The Commission has threatened not to extend beyond this year recognition of Swiss stock exchange rules that allow cross-border trading, which could touch off tit-for-tat escalation.
(Reporting by Michael Shields; Editing by Clarence Fernandez)