BERN (Reuters) - Switzerland’s main union federation will boycott talks the government has proposed on easing rules on wages and working conditions, dealing a potentially fatal blow to Swiss negotiations on forging a new treaty with the European Union.

President of the Swiss Federation of Trade Unions (SGB) Paul Rechsteiner sits between president of Swiss workers union UNIA Vania Alleva (R) and president of Swiss Gewerkschaft des Tansport Personals (SEV) transport workers union Giorgio Tuti (L) as he addresses a news conference in Bern, Switzerland August 8, 2018. REUTERS/Arnd Wiegmann

The announcement poses a major hurdle to a treaty, although Economy Minister Johann Schneider-Ammann said he thought an accord was still within reach despite what he called the unions’ “breach of trust” in consensus-loving Switzerland.

Brussels is pushing Bern to agree a treaty this year, saying it will not grant the Swiss more access to the EU’s single market -- the biggest for Swiss exports -- in the absence of an accord.

Failure to agree would damage economic ties and relations with its giant neighbour, but the labour rules have become a major sticking point.

Switzerland last month put on hold until autumn talks on future relations with the EU, including labour market rules, while it consulted cantons, employers and labour. Technical talks were due to start this week.

“The SGB (union federation) will not take part in the negotiations planned by Minister Schneider-Ammann on the flanking measures,” it said in a statement on Wednesday.

Negotiations to formalise ties now covered by around 100 separate accords had stumbled in recent weeks, with Swiss leaders conceding that Britain’s planned exit from the EU has made it more difficult to clinch a deal.

Talks have snagged in particular on Switzerland’s wish to protect pay for Swiss-based workers, Europe’s highest, a stance the government has in the past called non-negotiable.

“We will take all measures -- up to forcing a referendum -- to prevent a possible reduction of the protective measures,” SGB President Paul Rechsteiner, a member of parliament for the centre-left and generally pro-EU Social Democrats party that is part of the governing coalition, told a news conference.

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He said Schneider-Ammann’s envisioned concessions went too far and would not win the support they need in the cabinet and parliament.

At a hastily arranged news conference, Schneider-Ammann said the SGB had misrepresented his proposals and that preserving the current Swiss level of labour protection was “sacrosanct”.

He said talks to form a common domestic front on labour rules would continue and he hoped to calm the waters enough for all Swiss sides to sit down at the same table next month.

He said the EU treaty was not dead despite the blowup.

“A treaty is being discussed, I assume that it will and must come,” he said, adding this was the only way to provide legal certainty and draw investment that creates jobs.

Rechsteiner in June had ruled out any weakening of laws to prevent foreign workers from undercutting local working conditions, but his refusal to discuss any potential compromise takes the standoff to a new level.

Asked if he was prepared to see the treaty talks fail, Rechsteiner said: “If the European Commission keeps making the treaty dependent on having Switzerland weaken its protection of wages, then let’s leave it.”

Brussels has a particular problem with a Swiss rule that makes EU employers give Swiss authorities eight days advance notice before sending workers across the border for temporary work. They also have to put down deposits to cover any fines.

It wants the Swiss to phase out labour rules introduced in 2004 in response to a 2002 accord allowing the free movement of people, and instead adopt laws in line with those in EU members to combat overly aggressive foreign competition.

Labour unions and employers contend that the eight-day rule allows time to arrange spot checks of visiting workers.