Swiss Sputter as Merkel Buys Stolen Bank Data

BERLIN (Feb. 2) – Angela Merkel is set to pay almost $3.5 million to a whistle-blower for a list of alleged German tax evaders stashing money in Swiss banks, but the German chancellor may be getting more than she bargained for.

Germany's decision to purchase the list, allegedly stolen from a Swiss bank, has ignited a diplomatic row with Switzerland and a political backlash against Merkel among the rank and file of her conservative party, the Christian Democratic Union (CDU).

It emerged over the weekend that the German government was negotiating with an unknown informant who claimed to have details about the Swiss bank accounts of as many as 1,500 German citizens, who presumably don't pay German taxes. After a short deliberation, Merkel's government decided to purchase the data to aid its battle against tax evasion.

"Like every reasonable person, I support doing everything we can to clamp down on tax evasion," Merkel told reporters Monday. "If the data are relevant we should aim to get hold of (the list)."

Merkel's decision unleashed a storm of protest from the Swiss.

"This is a declaration of war," shouted Toni Brunner, controversial leader of the Swiss People's Party, a right-wing populist party that is on the rise in Switzerland.

Brunner, who last year successfully campaigned to block construction of minarets on mosques in Switzerland, is now considering launching a referendum to expel hundreds of thousands of Germans who live and work in Switzerland.

The outrage in Switzerland extends even to more moderate Swiss.

"What we are witnessing is a form of bank robbery," said Pirmin Bischof, a member of parliament from the Swiss Christian Democratic Party.

The current case is reminiscent of a similar one in 2008, when the German government agreed to pay an informant as much as $7 million for a list of German citizens with secret bank accounts in the tiny principality of Liechtenstein. Some analysts suggest the German government recovered more than $400 million in tax revenues by pursuing fortunes on the Liechtenstein list. Berlin has never disclosed how much it reaped in the action.

Yet Karel Lannoo, chief executive officer of the Brussels-based think tank Center for European Policy Studies, is concerned that Germany's fiscal gains are insignificant compared with the long-term damage wrought by encouraging theft of bank data and further souring the Swiss on its neighbors in the European Union.

"All this does is encourage blackmailers and data thieves," said Lannoo. "This is not the way we improve Swiss attitudes towards Europe."

Relations between Switzerland and major EU member countries such as Germany and France have suffered for years as the Alpine nation's powerful neighbors try to put an end to Swiss bank secrecy practices. Under Swiss law tax fraud is a crime, but tax evasion is not.

Under pressure from the United States, Germany, France and other major countries, the Organization for Economic Cooperation and Development has put pressure on Switzerland to change its banking practices and threatened to put the country on its blacklist of uncooperative tax havens. Switzerland avoided such a move last year by agreeing to negotiate bilateral tax cooperation agreements.

The Swiss banking secrecy law, enacted in 1934, has ensured that a steady stream of foreign capital has flowed into Swiss banks for the past 75 years. Without the assurance of anonymity, a flood of capital would likely leave the country, threatening one of the main pillars of the Swiss economy.

The threat to the Swiss way of life became all too clear when last year the Swiss bank UBS caved in to U.S. pressure and handed over the names of 4,700 U.S. clients. Swiss officials told the German newspaper Süddeutsche Zeitung that in the 18 months during which UBS locked horns with Washington, clients withdrew $172 billion from UBS accounts.

Thomas Sutter, a spokesman for the influential Swiss Bankers Association, urged the Swiss government to abandon bilateral tax cooperation talks with Germany in protest against Berlin's decision to purchase the stolen bank data.

"The Germans cannot support a criminal act and then engage in negotiations with Switzerland," he said.

Merkel may shrug off the angry words from Switzerland, but the row unfolding among the rank-and-file in her party is likely to be of more concern. Her center-right coalition with the pro-business Free Democrats (FDP) has just completed its first 100 days in office. Media commentators agree that it has been among the most troubled starts of any German government in recent memory. Merkel's apparent vulnerability has encouraged criticism of her decision to purchase the Swiss bank list.

"We're sending data thieves a message: If you steal, we'll buy it off you," complained Siegfried Kauder, a member of Merkel's party and chairman of parliament's judiciary committee.

Even a member of Merkel's cabinet, Defense Minister Karl-Theodor zu Guttenberg, raised questions about the chancellor's decision to do a deal with the informant. "I have a problem with handing over money for something that has come into someone's possession in a legally questionable fashion," said Guttenberg, a member of the Christian Social Union, a Bavarian conservative party allied with Merkel's CDU.

Senior members of the FDP, Merkel's coalition partner, also criticized the decision to purchase the data. "In a state based on the rule of law, the end does not justify the means," said Claudia Winterstein, the FDP's budget expert. "Otherwise one opens the doors to blackmailers."

The left-leaning Social Democrats, the main opposition party, welcomed Merkel's unusually swift decision to purchase the data.

"We cannot allow crooks to get away simply because they have been uncovered by crooks," said Sigmar Gabriel, the chairman of the Social Democrats.

One reason that Merkel may feel comfortable ignoring the protest from Switzerland and the chorus of critics within her own party is that she knows German voters are on her side. A public-opinion poll published Tuesday by the Forsa polling institute showed that 57 percent of Germans polled supported Merkel's decision to buy the stolen bank list, while 43 percent disapproved.