By Joshua Franklin and Michael Shields
ZURICH (Reuters) - Switzerland on Friday unveiled tough draft legislation for unilateral curbs on immigration, raising the stakes in talks with Brussels on limiting the influx of foreigners from the European Union.
Switzerland is two-thirds of the way through a three-year timetable to enforce a binding 2014 referendum vote in favor of immigration quotas which would violate a bilateral pact guaranteeing freedom of movement for EU workers.
With talks between Brussels and Berne still deadlocked, the Swiss government has now laid out a plan to go it alone on immigration controls but called this "Plan B" and stressed that an agreement with the EU was by far the preferred option.
"A mutual agreement is the only good solution for us," Justice Minister Simonetta Sommaruga told a news conference.
Talks are on hold until EU member Britain's June 23 referendum on whether to leave the bloc. Brussels is unwilling to show any flexibility in the Swiss talks that could encourage the British 'Out' camp.
The European Commission did not react immediately.
After a net inflow of more than 100,000 Europeans last year, around 1.3 million EU citizens already live in Switzerland, which is not a member of the 28-country bloc but has signed up to a host of bilateral agreements.
Factors ranging from concerns over a more competitive labor market to longer traffic jams due to overcrowding have stoked anti-foreigner sentiment in the wealthy Alpine confederation where a quarter of the population is not Swiss.
This came to a head in the 2014 referendum spearheaded by the anti-immigration Swiss People's Party, which won a narrow national majority.
The vote has jeopardized a package of Swiss-EU treaties that govern economic ties. A study commissioned by the government last year found exiting key bilateral pacts could cut output by up to 630 billion Swiss francs ($636 billion) by 2035, or as much as 7 percent of GDP.
Switzerland is hoping to use an article of its 2002 free movement agreement with the EU that speaks of remedies in the case of serious economic or social difficulties. The European Commission has said it aims to find a solution this year.
The new bills set up a commission that would fix an annual upper limit based on domestic labor supply, demand for foreign workers, unemployment and economic prospects. Quotas would ensue if the threshold is passed.
Sommaruga said Switzerland had the power to set such a high limit that it would not be triggered. But the government must walk a fine line to show it respects the will of voters.
The draft legislation now goes to parliament, where leading members have expressed reservations about unilateral action.
Stalling or rejecting the bills could buy time for more talks once the British referendum is out of the way and before the new immigration system would take effect in February 2017.
(Editing by Catherine Evans)