Politicians appeared visibly relieved after Swiss voters overwhelmingly turned down proposals to slash annual immigration by three-quarters from current levels - an initiative that could have sabotaged already fraught relations with the 28-nation bloc.

In February, Swiss voters backed an initiative calling for quotas on EU migrants. The government is still trying to implement the proposals while avoiding sanctions from Brussels, which regards the free movement of people as a fundamental right and core part of trade treaties with non-EU member Switzerland.

Switzerland's largest trading partner said it welcomed the outcome of Sunday's referendum, but gave no indication it was willing to budge.

"In the case of principles, there's never room for negotiation," Johannes Hahn, EU commissioner for regional policy, told a news conference in Brussels on Monday.

In 2012, Switzerland received the highest migration flow relative to its total population in the OECD, which is made up of 34 Western countries. More than 90 percent of foreign workers admitted that year were from the EU or associated countries in the European Economic Area, OECD figures showed on Monday.

Employers' associations and trade unions saw Sunday's vote as a sign that the Swiss are not prepared to sacrifice economic ties with the EU at the expense of rigid immigration quotas, and urged the government to push for a flexible interpretation of February's vote.

Nevertheless, the government must address public concerns about immigration among a population that voted for EU migrant quotas in February and among whom nearly 120,000 people signed a petition forcing Sunday's referendum.

"There might be a little bit more room for manoeuvre, but it's still quite a big issue," said Georg Lutz, a professor of political science at the University of Lausanne. "Switzerland is still far from having found a solution."

ZURICH (Reuters)