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EU attacks Swiss over bank reform
By Ambrose Evans-Pritchard in
Brussels
(Filed: 09/10/2002)
The European Union moved a step closer to economic warfare
against the Swiss yesterday, threatening to throttle Switzerland's
financial sector unless it agrees to abandon banking secrecy.
Frits Bolkestein, the European tax commissioner, put forward a list of
possible sanctions at a meeting of EU finance ministers in Luxembourg,
including the "nuclear option" of restrictions on capital movements by
Swiss investors and firms. The measures, to be finalised in December, also
covered suspension of bilateral agreements.
Chancellor Gordon Brown, the driving force behind the push
for sanctions, said: "We are determined to move this forward. We are
utterly serious about the importance of this issue."
EU diplomats warned yesterday that Mr Brown was playing
with fire by allowing the EU to threaten exchange controls against third
countries, even if the punitive measures don't come into force until
2010.
They said he is establishing a precedent that may come back
to haunt the City of London, which depends on free flow of capital for its
survival.
The tactics are aimed at forcing Switzerland to take part
in a Brussels plan to crack down on tax evasion by handing over
information on all EU citizens investing money in the country.
However, Swiss voters would almost certainly oppose the EU
demands in a referendum, obligatory under the constitution, even if their
government agreed. The Swiss financial sector accounts for 11 percent of
the country's GDP.
The scheme was proposed by Mr Brown as an alternative to an
EU withholding tax that threatened to devastate the City of London's
international bond business, and was trumpeted as a triumph of British
diplomacy at the EU's Feira summit in June 2000.
Without Swiss participation, the arrangement will fall
apart. Austria, Luxembourg, and Belgium all refuse to give up their own
banking secrecy codes unless other financial centres take part. The fear
at the Treasury is that the withholding tax could be resurrected.
Switzerland's entire political and business establishment
was united in fury yesterday. "This is absolutely outrageous. Switzerland
is not Iraq," said James Nason of the Swiss Bankers Association.
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