By Ruben Sprich

BERN (Reuters) - The Swiss government urged voters on Monday to reject quotas on immigrants from European Union countries in a planned referendum, saying the plan would harm the economy and strain relations with the 28-nation bloc.

Immigration is a hot-button issue in Switzerland, where the right-wing Swiss People's Party (SVP) has long blamed higher crime, rising rents and crowded transport on an influx of foreigners.

The SVP initiative "against mass immigration" seeks to amend the constitution and set annual quotas on permits granted to foreigners in Switzerland, where unemployment is just over 3 percent compared to more than 12 percent in the eurozone.

The referendum is scheduled for February 9.

"Approval of this initiative would jeopardize long-established bilateral relations with the European Union," Foreign Minister Didier Burkhalter told a news conference, adding it would test Swiss treaty obligations with the EU.

Economy Minister Johann Schneider-Ammann also weighed into the debate, saying: "Swiss businesses would find it difficult to recruit the necessary staff and would be faced with new hurdles when exporting their goods to the EU market."

Swiss industry heavyweights such as drugmakers Roche and Novartis as well as banks UBS and Credit Suisse have traditionally looked outside the country for highly skilled and specialized staff.

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While neutral Switzerland is not a member of the European Union, its immigration policy is based on free movement of people with the EU and allowing a restricted number of non-EU citizens to enter the country.

The number of foreigners from EU countries living in Switzerland rose 4.6 percent in the year to August to 1.23 million, data from the Swiss Federal Migration Office shows.

Switzerland has fared better than the eurozone following the financial crisis of 2008-9. The Alpine country's economy grew 0.5 percent in the second quarter of 2013, while the euro zone managed to expand by 0.3 percent after finally emerging from its longest economic slump. Parts of the 17-nation currency bloc remain severely depressed.

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The Swiss system of direct democracy - which allows for up to four national referenda a year - means popular outrage can more easily be translated into strong action than in many EU countries, where anti-immigrant sentiment is also on the rise.

The SVP successfully campaigned in a 2009 referendum for a ban on the building of new minarets in Switzerland.

However, the Swiss also have a history of voting against proposals they feel could hurt the country's economic success story or threaten competitiveness.

On Sunday, voters rejected a cap on executive salaries at 12 times that of a firm's lowest wage after warnings from industry leaders that the measure could harm the economy.

The Swiss government has also urged voters to reject another initiative to curb immigration that cites concerns over the impact of a rising population on the environment in the landlocked nation of eight million people.

(Writing by Katharina Bart. Additional reporting by Caroline Copley; Editing by Gareth Jones)