Vow to keep banking secrecy made

JOHN O’DONNELL AND JAN STRUPCZEWSKI
Last updated 22:18 12/04/2013

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Austria has vowed to stick to its bank secrecy laws, defying renewed pressure to follow Luxembourg in revealing information on European Union depositors with governments to clamp down on tax evasion.

The issue of tax havens and bank secrecy was a last-minute addition to the agenda of informal talks of European Union finance ministers in Dublin. Cyprus’ bailout and extending loan repayments for Portugal and Ireland were also under discussion.

Austria was a minority of one in defending its right to keep secrecy.

‘‘Austria is sticking to bank secrecy,’’ the country’s finance minister, Maria Fekter, told reporters before the first day of talks.

She said she did not believe an automatic exchange of information was needed, as was accepted in other EU countries, and that such a step would be an invasion of privacy rights.

Ministers were set to agree to give Ireland and Portugal seven more years to repay bailout loans from the European Union.

Their support for extending loan maturities for Portugal was likely to be conditional on Lisbon finding new ways to meet its 2013 budget targets, thrown into doubt by the constitutional court’s ruling that rejected some earlier planned measures.

Euro zone ministers attending were also to give their backing to a 10 billion euro bailout plan for Cyprus, under which Nicosia would have to come up with 13 billion euros of its own money to cover its needs over the next three years and the cost of restructuring of its banking sector which was halved in the bailout.

While the 13 billion is more than the initially envisaged 7 billion, the difference comes mainly from the agreement to close the country’s second biggest Laiki, or Popular, bank and restructure its biggest bank, the Bank of Cyprus.

The agreement between international lenders and Cyprus spells where Nicosia will get its part of the money from.

Among the plans, Cyprus will sell 400 million euros’ worth of gold reserves, and will have to raise corporate tax and capital gains tax rates at a time when its economy is forecast to shrink more than 12 percent in the next two years.

The ministers would not discuss any emergency measures to help Slovenia, where a large portfolio of bad loans has raised concern the country may need EU help, like Cyprus.

DIGGING IN HEELS

The ministers’ meeting follows Luxembourg’s decision this week to share foreign bank account details with EU governments from 2015, bringing it into line with all other countries in the bloc bar one - Austria.

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This discussion could see some frank exchanges between Germany, whose finance minister Wolfgang Schaeuble campaigned against bank secrecy, and Fekter, who has promised to fight ‘‘like a lion’’ to keep it.

‘‘Automatic exchange of information involves a massive interference in people’s privacy rights.

Here the state sniffs around deep into the private affairs of account holders,’’ Fekter said on Friday.

She criticised others, including the United States and Britain, for permitting tax havens.

‘‘Great Britain has many money laundering centres and tax havens in its immediate legal remit — the Channel Islands, Gibraltar, the Cayman Islands, Virgin Islands,’’ Fekter said, repeating earlier accusations.

‘‘These are all hot spots for tax evasion and money laundering,’’ she said, adding the standard imposed on Cyprus should be applied across Europe in the fight against tax havens.

The Dublin meeting was a so-called informal gathering - firstly of finance ministers for the euro zone countries, then for the full EU 27 - and no decisions were expected.

It would also debate how to press ahead with setting up a ‘‘banking union’’ across the euro zone and Irish Finance Minister Michael Noonan said he expected ministers to address last-minute  German concerns about the legal basis for allowing the European Central Bank to supervise banks.

Banking union is considered a critical long-term reform since it addresses how to cope with future crises, touching on issues such as shutting down or salvaging bad banks, pan-European deposit protection and establishing a resolution fund to pay for the clean-up.

But momentum has slackened in part because of German concerns, as the euro zone’s biggest economy, that it could be left on the hook for banks across the bloc.

Michel Barnier, the European commissioner in charge of regulation, said he hoped ministers would ‘‘redouble’’ efforts on banking union and tackling tax havens.

Part of this debate concerns possible direct recapitalisation of banks by the euro zone’s ESM bailout fund - a step meant to break the vicious circle between indebted governments and shaky banks.

Ireland, which hopes to exit its bailout programme this year, fears this promise, made by euro zone leaders, may never be fulfilled.

Noonan said in a newspaper interview today that ESM direct help to banks may have to wait until not only there is single supervision in the euro zone, but also a bank resolution mechanism - further delaying the prospect.

- Reuters

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