Other European governments are pressing Switzerland to ferret out tax cheats, a move the Swiss are resisting mightily because they fear it would frighten capital out of their banks.
As an autumn deadline looms to enact a European financial disclosure agreement, the controversy is becoming public, with European ministers regularly rebuking the Swiss for not joining the deal. The accord could fail entirely without Swiss involvement because its banks control about US$27 trillion of the world's funds and handle a third of all money transferred across European borders.
At stake, the Swiss worry, is the competitiveness of its banking industry, a pillar of the economy that thrives on legendary financial privacy. The 15-country EU insists that Switzerland help fight tax evasion -- though that is not a crime in the country -- by disclosing the amount of interest paid to nonresidents so they can be taxed accordingly.
Adding to the turmoil over potential economic disruption, the Swiss government raised an outcry this week after it acted to defend another Swiss pillar, its insurance companies. The seven ministers who govern Switzerland, meeting just before a vacation break, took a full percentage point off the legal return for the country's pensions.
That drew a furious response from trade unions, which said the ministers were caving to insurers' pressure. By reducing the pension return rate, the government helped shore up the insurance companies' bottom line, but at a cost to future pensioners.
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