Prince Alois fiercely defended Liechtenstein's right to govern itself and to keep its secretive banking system in his fourth Speech from the Throne, delivered on Thursday in the new Landtag or parliament building in Vaduz.
The 39-old Heriditary Prince runds the daily affairs of the principality since 2004, while his father Prince Hans Adam II remains Head of State.
Liechtenstein shook off the label of a money-laundering center after it hurriedly revised its banking laws seven years ago. Now the tiny Alpine principality is in trouble again, accused of being a haven for European tax evaders.
This famously discreet bastion of gentility returned to the media glare when German investigators alleged that hundreds of wealthy Germans have been stashing away their money in Liechtenstein trusts, hiding behind banking secrecy laws to keep from paying taxes in Germany.
It's a touchy subject for a country of 35,000 people on a land area only double the size of Manhattan, nestled in the Alps between Austria and Switzerland.
A medieval castle - home to the princely family von und zu Liechtenstein - towers over the glass-and-steel banks that line streets of the capital Vaduz. A contrast that underscores the speed with which Liechtenstein has developed since World War II, when it was still emerging from being a poor agricultural country.
Financial services have been a key factor in that transformation _ bringing an influx of wealth to the German-speaking principality whose per capita income of 112,000 Swiss francs (US$ 102,000; euro 69,600) now ranks it among Europe's wealthiest countries.
Angel Gurria, secretary-general of the Paris-based Organization for Economic Cooperation and Development, said the basic issue is how to deal with countries whose banking secrecy helps them profit from tax dodging by residents of other countries.
"Excessive bank secrecy rules and a failure to exchange information on foreign tax evaders are relics of a different time and have no role to play in the relations between democratic societies", Gurria said in a statement.
In Liechtenstein, the financial sector has been developing since the 1920s through close links with Switzerland _ another country whose fabled secrecy in banking matters has attracted fortunes from around the world.
The OECD, a 30-member watchdog body, on Tuesday said Liechtenstein was among only three countries still on its black list of uncooperative tax havens _ along with two other European principalities: Andorra and Monaco.
Banks and other financial services go right to the core of Liechtenstein's economy, providing 14.3 percent of the work force and contributing 30 percent of the gross domestic product of 4.3 billion Swiss francs (US$ 3.9 billion, euro 2.7 billion). The royal family owns the country's largest bank (LGT), which handles investments from clients around the globe.
Liechtenstein's ruling Prince Hans Adam II - who handed the day to day affairs of ruling the country to his son Heriditary Prince Alois - effectively has more powers than any other monarch in Europe, with sweeping rights that include dismissing governments and vetoing laws.
Alois jumped into the fray Tuesday to defend his realm _ saying Germany should get its own tax system under control. In a speech to parliament Thursday, Alois said Liechtenstein had more work to do on its finance laws and hinted that banking secrecy might have to be modified because of tax treaties so that perhaps it won't be so comprehensive as it is today.
Liechtenstein Justice Minister Klaus Tschuetscher said Wednesday that the practice of allowing foreigners to open trusts in Liechtenstein anonymously by registering them through a local attorney or trustee is in line with international law. He said the complaint that this encourages foreigners to use Liechtenstein trusts for tax evasion purposes was an absurd theory.
Financial analyst Andreas Venditti of the Zürcher Kantonalbank in Switzerland, said Liechtenstein's banks are suffering a blow to their reputation because of recent developments.
Claudia Meier, an analyst at Zurich-based private bank Vontobel, said: "We expect that the tax affair will have negative effects on the business of the Liechtenstein banks, with German clients withdrawing assets and new investments declining."
© RB; Sources: GPD, AP; Photos by © RB Marius Cirtiu, HJ
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