* Swiss outline plans to curtail immmigration after referendum
* Under proposals, quotas on EU citizens would be set from 2017
* EU says plans are incompatible with free movement pact
* SVP party says hard line designed to trigger new vote (Recasts with reaction from EU and SVP party, adds background)
By Katharina Bart and Alice Baghdjian
ZURICH, June 20 (Reuters) - Switzerland said on Friday it would introduce immigration quotas for EU citizens from 2017, sparking a sharp reaction from the European Union which dismissed the plans as incompatible with a 12-year-old pact that guarantees the free movement of workers.
The Swiss goverment’s plan was unveiled roughly four months after the country of 8 million narrowly voted to curtail immigration in a referendum initiated by the right-wing Swiss People’s Party (SVP).
The limits were vigorously opposed by Swiss business and the government in Berne, which is nevertheless forced to write the referendum result into law.
Unveiling the main elements of draft legislation that it plans to finalise later this year, the government made few concessions to appease the bloc, its biggest trading partner.
It said quotas would be introduced for anyone staying in Switzerland for longer than four months with the aim of reducing overall immigration levels by an unspecified amount.
The quotas, to be set annually, would also apply to the thousands of commuters who work in Switzerland but live across the border in countries like France, Italy, Germany or Austria.
“We would jeopardize direct democracy if our citizens could not rely on us to take their vote seriously,” Switzerland’s Justice Minister Simonetta Sommaruga told a news conference.
While EU workers would have preferred status compared to people from third countries, they would still be subject to the quotas.
The European Commission reacted swiftly, denouncing the Swiss proposal as “irreconcilable” with a pact that since 2002 has allowed Swiss and EU citizens to cross the border freely and work on either side as long as they have a contract or are self employed.
“Quantitative limits and national preference are contrary to our treaties. Negotiating them is not an option for the Commission,” Commission spokeswoman Maja Kocijancic said.
The plan was also criticised by the referendum’s chief backers, the SVP, who accused the government of deliberately provoking the EU with a hard line approach in the hope that its rejection might pave the way for a new referendum.
“Under no circumstances will the SVP accept that the new law is thwarted in such a manner,” said the party.
The SVP, which has grown rapidly since the 1980s and is now the biggest party in parliament, has made opposition to immigration a key message.
In its campaign for the referendum it tapped into fears that Swiss culture is being eroded by foreigners, who account for nearly a quarter of the population.
Those concerns are not limited to Switzerland. In elections to the European Parliament last month, populist, anti-immigrant parties came out on top in France, Britain and Denmark.
Free movement of people and jobs within its borders is one of the fundamental policies of the European Union, and Switzerland, while not a member of the 28-nation bloc, has participated under its pact with Brussels.
The free movement treaty is part of a package of seven agreements that the EU has said stand or fall together.
The accords also cover economic and technological cooperation, public procurement, mutual acceptance of diplomas and licences, agricultural trade, aviation, and road and rail traffic.
The vote, which passed by less than 20,000 votes, has deeply unsettled the Swiss business establishment.
The Swiss Employers Association has warned that it will discourage investment because firms will not be sure that they can recruit qualified staff.
Last month, security systems maker Tyco International said it would move company headquarters out of Switzerland to Ireland, in part because of the immigration rules but also due to caps on executive pay. (Reporting by Alice Baghdjian and Katharina Bart. Additional reporting by Barbara Lewis in Brussels.; Editing by Noah Barkin)