ZURICH, Switzerland (Reuters) -- Switzerland voted on Sunday to open its job market to workers from the European Union's 10 new member states, mostly from eastern Europe, cementing its relations with Brussels.

Despite right-wing warnings of floods of cheap labor, 56 percent of Switzerland's electorate endorsed government plans to extend an agreement with the EU on the free movement of people to its new member states, according to the Swiss state television SF1.

By early afternoon it seemed clear that Swiss voters backed the labor accord slightly more heavily than had been expected, despite right-wing warnings of floods of cheap labor.

A "yes" vote would cement the fiercely independent country's relations with the EU bloc.

The referendum is seen as a key test for Switzerland's relations with the EU. A "no" vote would have unraveled a raft of complex deals with the bloc, aimed at making cross-border trade and law enforcement easier.

With 60 percent of Swiss exports going to EU countries and 80 percent of its imports originating from there, the bloc is the country's main trading partner by far and sour relations would not bode well for the country's export-dependant economy.

"We shouldn't shut ourselves away. Switzerland is already an island anyway," said bank employee Therese Moser, who voted "yes."

A positive outcome of the nation-wide referendum would come as a relief for Switzerland's prominent banking community and industry bodies, who fretted a rejection would potentially be harmful to the Swiss economy and trading relations with the EU.

Crucial vote

It would also be seen as a victory for the Swiss government and a vote of confidence for its bilateral relationship with the 25-member EU.

"The result is a confirmation of Switzerland's bilateral road," said Daniel Vischer, member of parliament for Switzerland's Green Party.

In the run-up to the crucial vote, anti-EU campaigners warned that the modest reforms would lead to higher unemployment in Switzerland's protected labor market -- despite the fact that only around 3,000 workers from the new EU nations would be allowed in each year. The unemployment rate stood at an average of 3.9 percent in 2004.

As in France and The Netherlands where voters recently rejected a new EU constitution, many Swiss voters have voiced fears of competition from cheaper workers from eastern Europe.

Rolf Hoffman, 40, an unemployed gardener voted "no" in the nation-wide referendum.

"They will take our jobs and we will not have the money to support them. There will be more people looking for jobs and it will be harder for Swiss to find jobs," he said.

The accord -- which already applies to the EU's 15 older states -- would allow Swiss citizens to work and settle in the new EU countries, while they in turn could live in Switzerland, provided they have work and can support themselves.

The referendum is the fourth vote in little more than five years held on Switzerland's relationship with the European Union that surrounds it.

In June, Switzerland moved a step closer to its European neighbors by voting, by a narrow margin, to join the EU's passport-free "Schengen" zone.

Voters in the wealthy Alpine state rejected moving toward EU integration in 1992 and the government has since worked out a series of complex deals with the bloc.

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