Germany, like the US, has been highly critical of countries considered to be tax havens. Mostly, those are countries outside of Europe with financial and banking secrecy laws meant to woo (mostly) westerners with the lure of escaping taxation. There are a few notable exceptions within Europe: Luxembourg, Liechtenstein, and Switzerland.
All three are small, wealthy countries which lean heavily upon their allies. Luxembourg, in particular, has no navy, no air force, and approximately 800 citizens in its army. It looks to its neighboring allies for military protection, as well as for sources of income. Heavily dependent on finance, it follows the US as the second-largest investment fund center in the world and is the most important private banking center among countries that have converted to the Euro.
So while the three claim to not care what other countries think about their banking secrecy laws – and the source of their wealth – they clearly do, with both Switzerland and Liechtenstein taking steps to appease their friends and neighbors with promises of a more transparent banking process.
But Luxembourg won’t go quietly. The tiny country is now fighting a very public war of words with Germany. On Sunday, Luxembourg’s prime minister complained about recent comments made by Germany’s Finance Minister Peer Steinbrueck. Steinbrueck has been extremely critical of Switzerland, Luxembourg, and Liechtenstein, down to outright accusing them of aiding tax evasion. Steinbrueck has actually encouraged others to crack down on those countries engaging in such behavior, with his party chair going so far as to say that “in the old times one would have sent in troops” to combat tax havens.
Luxembourg Prime Minister Jean-Claude Juncker was not laughing. “We don’t find that funny,” he was quoted by Der Spiegel. “We suffered under German occupation. Thank God we no longer resolve our problems with soldiers.” He continued, “We don’t talk that way about the Germans. And the Germans have no right to talk that way about Luxembourgers.”
German Chancellor Angela Merkel made what almost sounds like an apology (almost) when she said, “If there has been irritation, I as head of government will do everything I can so that it is dispelled quickly.”
Merkel, however, also made it clear that she welcomed changes in banking secrecy laws as promised by her neighboring countries. It is not certain when those changes will occur as Luxembourg, Liechtenstein, and Switzerland have made no secret of the fact that they feel bullied into accommodating the wishes of their allies. Not surprising, since the three countries are somewhat stalwarts of tradition. Luxembourg’s motto perhaps sums this up best: “Mir wëlle bleiwe wat mir sinn” or “We want to remain what we are.”
Translation of the German Treasury Sec.: ” We’re pissed that you hide the money of those that we would otherwise tax the hell out of. As long as the rich have places to hide their money, we won’t have total control over them.”
The dubious banking secrecy laws of these countries are not only producing a tax haven for the rich, but are a heaven for corrupt leaders from third world countries who are parking development aid in these Luxembourg bank accounts. Nobody with a clean slate needs numbered bank accounts. So stop the whining Luxembourg.