Swiss canton banks, neutrality are sticking points in EU talks: paper cites finance minister

VIENNA (Reuters) - Switzerland's talks on a new treaty governing relations with the European Union remain difficult with state-backed cantonal banks and concerns about the country's neutrality cropping up as hurdles, Finance Minister Ueli Maurer was reported as saying.

Ties between the EU and non-member Switzerland are now governed by more than 100 separate agreements. Brussels is pushing Bern to agree a treaty this year, saying it will not grant the Swiss more access to the EU's single market -- the biggest for Swiss exports -- in the absence of an accord.

Talks had already snagged on Switzerland's wish to protect its own labour market and the pay and conditions for Swiss-based workers.

Now, the unrestricted state guarantee that Switzerland's cantonal banks benefit from could prove an additional obstacle because the European Union does not permit this kind of state aid, Swiss weekly Schweiz am Sonntag said.

"We still have to clarify this point to be able to approve a framework agreement," the paper cited the finance minister as saying.

Switzerland's neutrality could also turn out to be a major obstacle.

A framework agreement would have "a major impact on neutrality and would call it into question," Maurer said.

Any deal with the EU would be put to a binding referendum in Switzerland.

Failure to strike a deal after years of talks would plunge ties into a new ice age, and could prompt punitive steps.

For example, the EU's executive commission wants progress on a treaty before it renews permission for Swiss and European equity traders to access each others' markets beyond 2018.

(Reporting by Kirsti Knolle; Editing by Toby Chopra)