The bid, launched by the association for ecology and population (Ecopop), aims to restrain population growth in order to promote the “sustainable preservation of natural resources”.
But the government maintains the text to be submitted to a national vote on November 30th will not resolve any environmental problems and will be harmful to the economy.
The proposal comes after Swiss voters in February backed an initiative for unspecified immigration quotas over concerns about too many people moving to Switzerland from the European Union.
Simonetta Sommaruga, federal justice and police minister, said the government is not fearful that the Ecopop initiative will gain the same popular support but it must take such national votes seriously.
Sommaruga, a member of the Socialist party, told national French-language broadcaster RTS that people were already beginning to see the problems caused by the February immigration vote, which collides with the freedom of movement deal that Bern signed with the EU.
The move to restrict net immigration to around 17,000 a year from the recent average of 80,000 would cause “significantly more problems” and is “xenophobic”, she told a press conference in Bern.
The government has not yet implemented the initiative for immigration quotas and has more than two years to develop a plan for this.
But by comparison, the Ecopop initiative sets rigid limits that would not allow Swiss employers to meet their needs in periods when the economy is in full swing, Sommaruga said.
Companies could not recruit enough personnel from an indigenous workforce, she said, adding that the Swiss economy would lose the flexibility it now has.
Sommaruga noted that the initiative also fails to include any measures to manage the environment.
Ecopop backers launched their campaign earlier this month with a slogan calling for “a Switzerland with nine million residents rather than 12 million”.
The Swiss population is currently around 8.14 million and has been increasing annually by more one percent a year, largely due to immigration, which is feeding fears about over-density of urban centres in the country.
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The Ecopop campaign has won the support of Thomas Minder, the small businessman and independent senator from Schaffhausen, who spearheaded a successful initiative last year to curb the pay of Swiss company executives.
Minder says the federal government is not doing anything to halt the demographic growth that is making life more difficult for Swiss residents.
However, he is the only major political figure in favour of the initiative, which is opposed by all the parties in the upper and lower houses of parliament.
Unions and employer groups have also come out against the initiative saying it would lead to the elimination of jobs.