The foreign assault against Swiss banking secrecy continues – after the European Union and the United States, the G20 has joined the throng. Switzerland is ever more isolated after Luxembourg dropped its opposition to sharing bank data with its partners.
In an opinion piece published by the French newspaper Le Monde on April 10, Swiss Finance Minister Eveline Widmer-Schlumpf defended Switzerland’s so-called clean money strategy, outlining the measures taken by the government to fight tax evasion.
She pointed out that when Switzerland undertook reforms, it expected the international community to take note of the efforts made without launching another attack against the Swiss or threatening to take further retaliation measures.
The same day, her hopes were doused when Luxembourg announced it would lift bank secrecy rules for European Union citizens who have savings based in the country from 2015 onwards.
Austria, the only other staunch defender of banking secrecy within the EU, is also hinting it is ready to negotiate with Brussels.
Exposed
This sharp shift of policy by Luxembourg and Austria could leave Switzerland even more exposed to renewed attacks by the EU. So far, the three countries had mutually protected each other.
Luxembourg and Austria had previously stated that banking secrecy was not negotiable unless the Swiss did the same. Bern had also rejected pressure from the EU, saying that Brussels had to convince the two other nations first.
This tactic worked for years and the European Commission’s pressure failed to yield tangible results. The potential breakthrough came from the United States, with Switzerland, Luxembourg and Austria expected to ratify the FATCA (Foreign Account Tax Compliance Act) accord in the coming months.
Under this agreement, the US can obtain all the banking data concerning its citizens living in Europe, de facto eliminating banking secrecy. Any resistance will be met with retaliatory measures, the Americans have promised.
«Given the sanctions announced by Washington, rejecting the accord would not be a realistic option,» said Maurice Pedergnana, an economist at the University of Lucerne.
«Swiss banks would no longer be able to operate in the US or hold American bonds and shares. You cannot have wealth management services without proper access to the world’s biggest financial market.»
If Austria, Luxembourg and Switzerland give the go-ahead to the accord, they will find it hard to resist pressure from the EU to provide the same kind of access to bank client data.
Crunch time
On April 14, Germany, France, Britain, Italy and Spain renewed their attack on banking secrecy. They added the automatic exchange of data to the agenda of the next EU summit in May, with an avowed aim of making it the norm – including for Switzerland – by 2015.
New pressures surfaced following a meeting of the finance ministers of the G20 club of advanced and emerging economies on April 19 that endorsed automatic exchange of tax data among nations, calling it the expected new standard for how governments can help each other fight cross-border tax cheating.
Widmer-Schlumpf told reporters after the meeting that Switzerland was ready to take part in discussions under the condition that it was «not just a European standard but a global one.» and included offshore tax havens. This position, supported by the head of the Swiss Bankers Association Patrick Odier, does not have the backing of the majority of Swiss cabinet members or parliament, however, who are refusing – or at least delaying – any discussion on automatic exchange of tax data.
For Pedergnana, waiting to see how things pan out is a recipe for trouble. «It’s a position that is based on an outdated way of thinking and business models,» he told swissinfo.ch.
«Switzerland cannot avoid negotiating with the EU, its biggest trade partner. We are a small country far too involved in the global economy to behave like an island.»
He adds that playing the waiting game will reduce any wiggle room during talks.
«Switzerland should present a clear strategy and concrete proposals to get some concessions from the EU,» he added. «And that should be, first and foremost, free access for Swiss banks to the European financial market.»
«European rhetoric»
In parliament, politicians on the left agree. «We have two paths of action now,» said the centre-left Social Democrat Carlo Sommaruga. «We can either wait to end up on a grey or blacklist, as in 2009, and be forced to act quickly, or we can take note of what’s happening around the world and join forces with Luxembourg and Austria to define the terms of negotiations with the EU.»
He added: «We could, for example, demand that any new standards be extended to the special tax regimes afforded in some Anglo-Saxon countries.»
On the political right, most parties prefer to wait and see. «As long as Brussels demands we surrender unilaterally without some compensation, Switzerland shouldn’t budge,» said the centre-right Radical Christian Lüscher.
«The EU is piling on the pressure for so-called ethical reasons, but it is in fact trying to protect its interior market by refusing any access to our banks.»
Politicians from the rightwing Swiss People’s Party are not even considering changes to banking secrecy.
«We are facing the usual European rhetoric that we have wrongly taken too seriously in the past. Brussels is not really in a position to impose anything on us as it is too dependent on Switzerland,» said People’s Party representative Yves Nidegger.
«You only have to think about transport [to understand this]. In my opinion, the cost of a war would be less than if we give in, as it would only lead to a weakening of our financial services.»