(Reuters) – More than four years of negotiations have failed to yield a breakthrough on a new treaty between Switzerland and the European Union, by far its biggest trading partner.

Failure of the talks could send shock waves through Switzerland that go far beyond a diplomatic deep freeze.

STOCK TRADING

Brussels has threatened not to extend beyond June recognition of Swiss exchange regulation that allows cross-border trading, depriving the SIX Swiss Exchange of EU-based business that generates more than half its volume.

The Swiss government is preparing countermeasures designed to bring trading of Swiss stocks back to Switzerland from EU bourses. It would ban EU exchanges from hosting trading of Swiss stocks, exposing EU bourse officials to punitive measures if they did not comply.

The tit-for-tat escalation could disrupt financial flows, making it “significantly harder” to launch initial public offerings of shares in Switzerland given the absence of demand from the EU, one Swiss official has said.

ELECTRICITY UNION

Former Swiss Energy Minister Doris Leuthard has lobbied for a deal that would create an electricity union with the EU, fostering cross-border flows and ensuring power supplies to Switzerland in emergencies.

But the EU has said the Swiss will get no new access to its single market without a new treaty, scuppering chances for a new power bloc.

E-COMMERCE

The standoff could leave Switzerland on the sidelines as the EU moves to complete a digital single market that breaks down barriers for consumers and business.

MEDICAL TECHNOLOGY

The 120 sectoral accords that now govern bilateral ties include a pact on mutual recognition of industrial standards that need to get updated as new rules take effect.

Swiss officials have cited medical technology as an exposed sector. It employs around 58,500 people and generates annual sales of nearly 16 billion Swiss francs ($16 billion).

RESEARCH

Switzerland could lose access to the EU’s Horizon Europe programme, which starts in 2021 and funds research and innovation. Brussels temporarily blocked Switzerland from the current Horizon 2020 programme, hurting Swiss research, after Swiss voters in 2014 approved a referendum campaign to curb immigration from the EU despite accords ensuring the free movement of people.

($1 = 0.9989 Swiss francs)