Bizwatch

The Swiss Open Up
After the E.U. constitution was rejected by the French and Dutch, and another bitter scrap broke out over the E.U. budget, Brussels won a quiet sign of support last week from an unlikely corner. In a referendum, 55% of Swiss voters approved joining the E.U.-run Schengen area, which lifts internal border checks. Integration doesn't come easy to the Swiss. Voters declined membership of the European Economic Area, a staging post to full E.U. membership, in 1992; a poll in 2001 shelved the possibility of membership talks even though around two-thirds of the country's exports head into the E.U. Instead, Bern has crafted bilateral deals with Brussels governing trade and commerce. But does Swiss cherry-picking pay off?

While economists forecast slow growth this year of a little over 1%, unemployment is 3.7%, well below rates across all 25 E.U. states. And Switzerland 's GDP per capita trumps its near neighbors', according to the O.E.C.D. For firms operating in the country, that's a sign of "stability in the workforce," says Matt Jackson, a Washington-based international corporate location specialist with Deloitte. Foreign firms agree. Steve McCracken, CEO of Ohio-based global packaging firm O-I, last week slammed the "socialistic" barriers to businesses in parts of the E.U., two months after announcing plans to locate the firm's European base in Lausanne. But barriers of a different kind worry the E.U.

Ahead of another referendum in September — this one on opening the country to the free movement of labor from the E.U.'s 10 newest members — one E.U. commissioner warned a potential no vote would throw the Swiss membership of Schengen into doubt. Not everything can be expected to run like clockwork, even in Switzerland

Race To The Bottom
Is there still a market for the "people's car"? Volkswagen appears to think so. Reports in the European press last week claimed the German automaker is thinking of steering a no-frills, €3,000 run-around toward emerging markets such as China, even though a similar plan by rival Renault has already veered off course. Dacia, Renault's Romanian subsidiary, has sold around 70,000 of its Logan cars since unveiling them in eastern Europe last year. But customers haven't been buying the basic €5,000 car the manufacturer designed for them; instead they've demanded expensive extras. Last week the French were introduced to the Logan ahead of its wider rollout across Western Europe in the coming months — but it will cost at least €7,500. So could VW be set to take a similar detour? Possibly, according to industry experts, because car buyers in developing countries are developing extravagant tastes. "Romanians read motor magazines; the Chinese car customer is extremely knowledgeable," says Professor Garel Rhys, head of Cardiff University 's Centre for Automotive Industry Research. "They've seen the flow of the newer Western cars coming in." He adds that piling on optional extras doesn't usually give the customer value for money. Better, advises Rhys, to go for "a low-mileage used vehicle." VW Beetle, anyone?

The Bottom Line
	These are the good ol' days. These are the best of times. After this, it gets worse
		DOUGLAS HOLTZ-EAKIN, director of the U.S. Congressional Budget Office, dampening forecasts of a lower-than-expected U.S. budget deficit for 2005