Merkel warns Lichtenstein of seclusion
The German chancellor, Angela Merkel threatened Liechtenstein with isolation in Europe, unless the Alpine tax haven eased bank secrecy. This happened even as bilateral tensions grew over Berlin’s handling of its spiraling tax evasion inquiry. Ms Merkel was speaking at Berlin after a meeting with Liechtenstein’s Prime Minister, Otmar Hasler. She accused the principality’s banks of “encouraging lawbreaking” in Germany by offering services allowing tax evasion. The German Chancellor warned that Germany could block Liechtenstein’s entry into the European Union’s border-free Schengen zone due in November. The principality’s entry into Schengen is expected to be discussed next Thursday by EU interior ministers, but Ms Merkel has made it clear that she “would not be surprised” if the German parliament “linked” its confirmation of the territory’s membership to other issues. German legislators reflected the same notion on Wednesday, calling an end to the status of Vaduz, the capital of Liechtenstein as a tax haven in the heart of Europe.
Angel Merkel was speaking almost a week after German prosecutors had launched an investigation in as many as 1,000 people who were suspected of hiding funds worth millions of euros via special trusts in Liechtenstein. The chancellor issued a stern warning to Liechtenstein saying it must act fast as “the clock is ticking”. Ms Merkel’s hardened stance reflected the souring of Berlin’s relations with Vaduz over the tax affair. This was as an aftermath when Crown Price Alois von Liechtenstein accused Germany of mounting “an attack” on his country, by allowing its secret service agents to buy allegedly stolen data on back clients from a former bank employee in the principality. Price Alois also expressed disgust in the way the tiny German-speaking territory being perpetually dominated by Berlin, calling it an “overpowering state”. To this, Ms Merkel retorted that the Prince’s outbursts are not making things any easier and that it was “not the right way to proceed and frankly its not helpful for out relationship”.
Mr. Hasler had sought to reduce tensions, and offered Germany assistance with its investigations. He accepted that Liechtenstein’s standing as a financial center was “going through a reform process”, but rejected the German accusation that it was actively promoting tax crime with its system of special foundations. He clarified, saying that it’s not legitimate to say that investing in Liechtenstein’s foundations means tax evasion. However, he did not publicly respond to specific calls for greater financial transparency. She said Vaduz should move quickly to abide by global guidelines set by Organization for Economic Co-operation and Development to reduce tax haven secrecy. OECD officials said that Liechtenstein was the “most secretive” of all tax havens monitored by the organization- even more notorious and reclusive than Monaco and Andorra, which are also on its blacklist of “uncooperative jurisdictions”. The ball is clearly in Liechtenstein’s court; either, set the tax system straight or be prepared to be treated as an outcast. Germany is too powerful a country and holds dominant and extensive influence and Liechtenstein would do well to come to terms with this fact.
