Eleven EU members back Swiss in dispute with Brussels

The letter to the European Commission from the 11 -- including Germany, Austria and Britain -- said Switzerland was treated unfairly last month when its exchanges got only one year of market access.

Bern has threatened to retaliate against what it calls unacceptable discrimination, hurting ties with its main trading partner that had been easing after the Swiss parliament in 2016 skirted voters' demands for immigration quotas on EU citizens.

The Commission must certify that other countries' exchanges have rules in place that are equivalent to new EU standards.

All 28 EU members except Britain, which is leaving the EU, backed the one-year access proposal in December after the Commission changed tack from an original proposal in November for unlimited Swiss access, which won member approval.

Such a switch was warranted "only in very exceptional cases", the letter said.

"Although we did not express our opposition to the resubmitted draft equivalence decision due to the need for an equivalence decision to be in place for 3 January 2018, we continue to pursue the goal of an unlimited equivalence recognition of the legal and supervisory framework applicable to stock exchanges in Switzerland," it added.

One EU diplomat said there was a risk of setting a dangerous precedent that might be used for Britain after its exit from the bloc.

A Commission spokesman stressed that the eventual decision had been unanimous.

"The fact that somebody then after the decision wrote a letter is another matter," he said.

Bern wants the same regulatory status for Swiss bourses as those in other countries have, enabling EU investors to trade in Switzerland, a crucial source of exchange volume.

Diplomatic sources say the hardball approach arose from Commission ire over Swiss foot-dragging on a new treaty that Brussels wants to replace a patchwork of 120 bilateral accords now governing ties.

The project has hit obstacles as right-wing and conservative parties in Switzerland baulk at giving the European Court of Justice a say in settling disputes over EU laws that Switzerland would have to adopt as the price of enhanced access to the single market.

Many argue that Switzerland should await the outcome of British-EU Brexit negotiations before signing any new accord.

New Swiss Foreign Minister Ignazio Cassis is supposed to present his cabinet colleagues on Wednesday with proposals to break the logjam.

(Reporting by Michael Shields in Zurich, Philip Blenkinsop in Brussels; Editing by Adrian Croft)