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1st Mar 2024

Austria attacks UK, as EU finance talks get ugly

  • Fekter - Austria is looking increasingly isolated on bank secrecy after Luxembourg capitulated (Photo: consilium.europa.eu)

Austria has accused the UK of being a haven for money launderers ahead of an EU meeting in Dublin, with Cyprus, Ireland, Portugal and Slovenia's (potential) bailout needs also on the agenda.

The Austrian finance minister, Maria Fekter, described Britain as "the island of the blessed for tax evasion and money laundering" in an interview with her country's Kurier newspaper on Thursday (11 April).

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Comparing the UK and its "protectorates" - micro-states subject to British law - to Cyprus in terms of hosting secretive foundations and trusts, she noted: "Just as we urged the abolition of sealed foundations in the Cyprus rescue to drain the money laundering swamp, we must demand the same of the United Kingdom."

She added: "We want a trust registry for the Channel Islands, but also for countries where British law applies, such as the Cayman Islands, the [British] Virgin Islands or Gibraltar … These are all areas that are havens for tax evaders."

She repeated her message in a second interview with the Die Presse newspaper, saying: "What we demand of Cyprus, a small island, we also demand of the UK."

Fekter spoke on the eve of an informal meeting of EU finance ministers in Dublin on Friday and Saturday set to discuss a joint initiative by the UK, as well as France, Germany, Italy and Spain, to introduce "automatic exchange" of information on foreigners' bank accounts.

Luxembourg earlier in the week caved in by promising to abolish bank secrecy in 2015, leaving Austria isolated on the subject.

Fekter is not throwing in the towel just yet, however.

"This [automatic exchange] is a massive invasion of privacy, which we do not want … Austria is not a haven for tax evaders, we are a high tax country," she told Kurier.

Despite the prominence of the tax haven debate - fuelled by a massive leak of secret bank data to US-based journalists and by revelations of tax-dodging by a French minister - EU officials told press in Brussels on Thursday that "in political terms, probably the most important agenda item" will be Cyprus.

Ministers are to seal a political agreement on the Cypriot bailout model, negotiated in March, with formal approval to follow in April and with the first payments expected in early May.

Leaked documents from the troika of international lenders - the European Commission, the European Central Bank and the International Monetary Fund - earlier this week show the financial situation on the island remains unstable.

The March bailout model spoke of a €10 billion troika loan and a €7 billion contribution from Cyprus. But the latest blueprint says Cyprus will need to find €13 billion from its own pocket, with "final touches" still being added to the deal.

Another troika paper obtained by the FT on Thursday recommended that eurozone countries give Ireland and Portugal a seven-year extension on the repayment of their bailout loans.

The two countries had asked for a 15-year extension to help lower the price of borrowing on bond markets.

But the troika paper noted: "An extension of the average maturity by seven years would provide a balanced compromise between the lender and creditor constrains."

The paper said the decision should be announced "early" and implemented "quickly" because of the "current volatility in the markets."

An EU official noted on Thursday the talks on easing Portugal's terms will be "more exciting" after its constitutional court struck down €1.3 billion worth of austerity measures needed to meet lenders' demands.

"We await a report from Portuguese finance minister on this. Implementation [of the bailout] by the Irish authorities continues to be exemplary," the EU source noted.

Meanwhile, Slovenian news agency STA has reported that Ljubljana's finance chief, Uros Cufer, will meet officials from the commission, the IMF and the EU's Luxembourg-based bailout fund, the ESM, on Friday in the margins of the Dublin event.

The news fuelled speculation that Slovenia might ask for EU help with its own failing banks - a notion vigorously denied by its top politicians.

The EU official said there is "need for significant reforms in the Slovenian banking sector" and that Cufer, who is making his EU debut as part of Slovenia's new government, "will give a presentation of policy plans."

The official added there is "no intention of Slovenia applying for ... a [bank rescue] programme."

He also said the Cypriot bailout - the first one in the history of the crisis to seize money from savers in wobbly banks - is "not a template."

With Austria, Luxembourg, Malta and Slovenia struggling to avoid comparisons with Cyprus in terms of bank secrecy, non-performing bank loans or imbalance in the banking-sector-to-GDP ratio, the EU official noted: "You will find no other banking sector [in the EU] that is even vaguely similar [to Cyprus]."

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Analysis

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Privacy concerns and the fear of losing big money from abroad are the main reasons why Austria is still holding out against an EU scheme to lift bank secrecy in Europe.

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