Although it lies close to the geographical centre of Europe, and most of its trade is with its European neighbours, it is not an EU member. A referendum in 2001 went against opening talks on joining.
Membership of the European Economic Area was also rejected by referendum in 1992 and Swiss-EU relations are now based on an extensive range of bilateral agreements.
Ties became closer in 2005 when a referendum backed membership of the EU Schengen and Dublin agreements, bringing Switzerland into Europe's passport-free zone and increasing cooperation on crime and asylum issues. A further referendum the same year opened the job market to workers from the 10 newest EU member countries.
At the same time Switzerland has been gradually acceding to international pressure to allow greater scrutiny of its famously secretive banking sector, amid growing concerns about money-laundering and the financing of terrorist groups.
The country forms a European cultural and linguistic crossroads, with about two-thirds of the population speaking German, around one-fifth French and about 7% Italian. Romansch, the fourth national language, is spoken by less than 1% of the population.
The people are given a direct say in their own affairs under Switzerland's system of direct democracy, which has no parallel in any other country.
They are invited to the polls several times a year to vote in national or regional referendums and people's initiatives. Constitutional proposals and major international treaties must be put to the vote, and parliamentary decisions can be subjected to a vote by collecting 50,000 signatures.
The tradition of a citizen army, seen as an essential part of Swiss neutrality, runs deep. During the Cold War the Swiss maintained one of Europe's largest land-based armies. The extremely costly militia system, under which every adult male was conscripted and remained in the reserves until middle age, has been slowly streamlined.
The government expressed its regrets over the country's behaviour in World War II following a report by an independent panel of historians on Swiss relations with the Nazis. The report found that the authorities had known what lay in store for the Jewish refugees to whom they closed their borders in 1942, and had assisted the economy of Nazi Germany, although not to a degree that prolonged the war.
Federal President (rotating): Eveline Widmer-Schlumpf (until 1 Jan 2013)
Switzerland is unusual in having a collective head of state, the seven-member Federal Council, which doubles up as the country's cabinet.
The council was set up by the constitution of 1848, which is still in force today.
Members are elected for four-year terms by a joint session of both houses of parliament, although in practice changes in membership are rare, making the Federal Council one of the world's most stable governments.
The election of a new female minister to the Federal Council in September 2010 gave the cabinet a majority of women for the first time in the country's history.
Each year, by tradition, a different member of the council fills the largely ceremonial post of Federal President on a rotating basis. The office does not confer the status of head of state, which is held jointly by all the councillors. Until 1 January 2012, it was held by Micheline Calmy-Rey, a Social Democrat from the southern canton of Valais.
For decades, the Federal Council was made up by a grand coalition of all the main parties in parliament, in an effort to ensure stability and promote consensus.
From 1959, membership was apportioned in accordance to a fixed formula which gave the liberal Free Democrats (FDP) two seats, the centre-left Social Democrats (SP) two, the centre-right Christian Democrats (CVP) two and the right-wing Swiss People's Party (SVP) one, regardless of any changes in their share of MPs.
This "magic formula" was amended in 2003, when the anti-EU Swiss People's Party overtook the Free Democrats and Social Democrats to become the most popular party, and was given a second post, at the expense of the waning Christian Democrats.
However, in December 2007, the party ended decades of consensus politics when it suspended its two councillors and declared itself in opposition, after parliament refused to re-elect SVP leader Christoph Blocher to the council over the party's anti-immigration election campaign.
But the Swiss People's Party regained a seat on the council in December 2008. One of the two councillors expelled from the SVP in 2007, is still in office, but as a member of an SVP breakaway group, the Conservative Democratic Party (BDP).
Broadcasting is dominated by the public Swiss Broadcasting Corporation (SRG/SSR) which operates seven TV networks and 18 radio stations. Most of its funding comes from licence fee revenues; a smaller proportion comes from TV advertising.
Private radio and TV stations operate at a regional level.
Television stations from France, Germany and Italy are widely available, thanks in part to the very high take-up of multi-channel cable and satellite TV.
Some German commercial broadcasters provide tailored versions of their channels for the Swiss market.
Switzerland's press has full editorial freedom and mainly operates along regional lines which reflect linguistic divisions.
By March 2011 there were 6.15 million internet users (Internetworldstats).