ZURICH, Oct 23 (Reuters) - The Swiss government urged voters on Wednesday to reject an environmentalist group's call to limit immigration, a step the cabinet said would damage the economy and violate international agreements on free movement of people.
Proponents of the measure to cap population growth through immigration at 0.2 percent a year gathered enough signatures last year to force a referendum on the issue under the Swiss system of direct democracy.
The "Ecopop" campaign has said a lack of living space was exerting too much pressure on the land and natural resources in the landlocked, Alpine country whose population surpassed 8 million last year.
Foreigners accounted for more than 1.9 million permanent residents as of the end of June, government data show.
In a statement after a cabinet meeting, the government recommended rejecting the proposal, which also calls for earmarking 10 percent of Swiss development aid for promoting voluntary family planning.
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, it said.
"Greatly restricting immigration into Switzerland, as proposed by the initiative, would mean that some sectors of the economy would be unable to recruit the workers they require," it said.
A host of industry heavyweights such as drugmakers Roche and Novartis as well as banks UBS and Credit Suisse have traditionally looked outside Switzerland for highly skilled and specialised staff.
Linking development aid to family planning was unlikely to have the desired effect and would reduce funding for other important measures, the government said.
The Ecopop initiative reflects growing concern about overcrowding among residents of Switzerland, whose population has risen more than 140 percent since 1990.
Voters last year backed a proposal to severely limit the building of second homes after proponents argued rampant overdevelopment risked destroying Switzerland's natural beauty.
Encouraged by voter approval in 2009 to ban construction of new minarets, the right-wing Swiss People's Party - which has seats in the coalition government along with all the major parties - has long blamed rising rents and crowded transport on an influx of foreigners.
It has organised a vote to "stop mass immigration" by reimposing quotas on foreigners from the European Union. That referendum takes place in February, but no date has been set yet for the Ecopop vote. (Reporting by Michael Shields; Editing by Alison Williams)