Bilateral relations between Switzerland and the European Union changed little in 2007 despite a highly publicised disagreement over Swiss tax practices.
But tensions could rise in the new year if Swiss voters are called to the polls to decide whether to extend a free movement of people accord to the latest EU members, Romania and Bulgaria.
2007 was a "transition" year, according to René Schwok, political science professor at the European Institute of Geneva University.
"The year was to a certain degree abnormal: No key agreements came into force and no initiatives on EU themes were launched," Schwok told swissinfo.
"The only important issue was the dispute over corporate tax breaks offered by some Swiss cantons."
The EU increased pressure on Switzerland in February when it claimed that Switzerland's tax regime unfairly discriminated in favour of certain foreign companies, violating a 1972 free trade agreement.
But the Swiss government's reaction was swift, declaring there was nothing to be negotiated.
Finance Minister Hans-Rudolf Merz said the 1972 accord affected only the trade of goods and added that corporate taxation was a cantonal and not a federal issue.
"The key question is whether the EU will pursue its attack and turn this into a larger conflict," Schwok said. But the EU ambassador to Switzerland, Michael Reiterer, has already expressed Brussels' desire not to escalate matters.
June saw the bilateral agreement on the free movement of people come into force for the "old" 15 EU member states, Malta and Cyprus as well as Efta nations Iceland, Norway and Liechtenstein.
In other words, residents of these countries were suddenly free to compete for jobs in Switzerland alongside the Swiss. But a clause will allow Bern to place limits on immigration if too many EU citizens flood into the country (10 per cent above the average of the past three years).
Parliament will decide in 2008 the extent to which it will confer similar rights to the people of Bulgaria and Romania.
According to Switzerland's Federal Migration Office, both Bern and Brussels favour a gradual, controlled opening of the Swiss job market. But whatever parliament decides, voters will have the final say in a referendum later in the year or in 2009 since such a move requires a change to the constitution.
Schwok thinks the Swiss People's Party could try to put a spanner in the Swiss-EU works, especially since the rightwing group said it would go into opposition. It took this step following parliament's decision in December to replace the hard-line justice minister, Christoph Blocher, with a more moderate member of the party, Eveline Widmer-Schlumpf.
"The People's Party could launch a double referendum – one opposed to offering free movement to the people of Bulgaria and Romania and another against the extension [beyond the initial term] of the accord to the first 25 EU member states," Schwok explained.
EU expansion has had other implications for Switzerland. Parliament and voters agreed to support development in the states that joined in 2004 to the tune of SFr1 billion ($870 million). Switzerland will now be expected to put a further SFr330 million into the pot for the latest members.
"By saying yes to the EU cohesion fund in 2006 we have implicitly accepted the provision of aid for Romania and Bulgaria," Schwok said.
There is only one thing for certain when it comes to Switzerland's relations with the EU, Schwok sums up.
"Bilateral agreements will be necessary as long as there is an EU and the island of Switzerland in the middle of it. It's a never ending story."
swissinfo, Luigi Jorio
Switzerland - European Union
Switzerland is not a member of the European Union.
The federal government describes EU membership as a "long-term option".
Switzerland is linked to the EU via a series of bilateral accords.
The EU is Switzerland's main trading partner.
In the 1990s debate over Switzerland's policy towards Europe polarised the national political landscape.
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