PREVIEW-Swiss to vote on $800 mln aid to new EU states

By Richard Waddington

GENEVA, Nov 23 (Reuters) - Switzerland votes on Sunday on government plans for 1 billion Swiss francs ($800 million) in aid to the newest members of the European Union, with Swiss ministers warning rejection could harm relations with Brussels.

The EU is by far the rich Alpine state's largest trading partner and government officials say the planned assistance to the 10 mostly east European countries that joined in 2004, which will be spread over 10 years, is a sound investment.

"What is at stake is not just any old question of financing, but Switzerland's place in Europe and the defence of our interests," Foreign Minister Micheline Calmy-Rey said in a newspaper interview.

But the aid, which has been approved by parliament, is opposed by the right-wing Swiss People's Party (SVP), which raised the signatures needed to force a referendum under Switzerland's system of direct democracy.

The fervently anti-EU SVP says that the $1 billion may only be the tip of the iceberg and that once approval is given there is no knowing just how much Switzerland will have to shell out.

The latest opinion poll, carried out in mid-November, shows some 49 percent backing the government plan, with 37 percent against and 14 percent undecided.

Poland, with 489 million Swiss francs, would be the largest recipient out of the 10, which joined in May 2004, followed by Hungary with 131 million and the Czech Republic with 110 million.

The money would be part of a vastly larger transfer of funds by Brussels aimed at improving infrastructure in the mainly former Soviet bloc countries and narrowing the yawning economic gap with the other EU member states.

Neutral Switzerland is not a member of the 25-state EU, but it is surrounded by members of the bloc and they account for over one third of its trade.

Officials say that its economy will benefit from EU enlargement and if it refuses to help pay the bill, its ties with its neighbours could suffer.

"The EU ... would have difficulty in understanding why a country that benefits from the (EU) extension towards the east does not join the common effort (to pay)," Calmy-Rey said.

The amount is significantly less than the 1.6 billion Swiss francs ($1.31 billion) that Norway, another European state outside the EU, is prepared to contribute.

The Swiss government says that it will be able to cover the cost of assistance without tax increases or raising more debt. Over 60 percent would come from re-directing aid that is already being given to some eastern European countries, including Russia.

Any aid package for Romania and Bulgaria, which join the bloc in January, would be subject to a separate law. ((Reporting by Richard Waddington; editing by Alison Williams; richard.waddington@reuters.com; geneva.newsroom@reuters.com, +41 22 733 3831)) ($1=1.223 Swiss Franc)

Keywords: SWISS REFERENDUM