The Great Debate UK
from The Great Debate:
If Swiss banks were to cast off their usual discretion and make a marketing pitch these days, it might start off something like this:
Dear Potential Client,
While we would be delighted to open an account and manage your money for you, once you’ve complied with our anti-money laundering provisions, please be advised that we will no longer be able to help you avoid taxes back home, and in fact may soon start providing account details to your national tax authorities. Moreover, if you are American, please stay away. We’ve been so beaten up by the Justice Department that we’d rather not take your money at all.
That may not sound like a compelling proposition, but it hasn't scared off everyone -- so far. In fact, according to the latest monthly statistics published by the Swiss National Bank, foreigners have been depositing a growing volume of assets into Swiss banks. The 45 billion Swiss Francs ($50 billion) invested in Swiss savings and deposit accounts at the end of March represent an almost 30 percent increase from a year ago.
Yet these strong numbers belie the existential angst among bankers in Zurich and Geneva. Switzerland is bowing to massive international pressure -- regulatory, judicial and political -- to clean up its banking system, and the big question is how it can remain competitive as a financial center once it has done so. The fabled secrecy that Swiss banks used to provide -- and which was a key to its attractiveness as a financial center -- has been cracked open and replaced by a more nebulous form of confidentiality and privacy, the full details of which still need to be hammered out in international agreements.
By Kathleen Brooks. The opinions expressed are her own.
While some market commentators are questioning if the euro zone should even exist, authorities in Switzerland might be looking with envy at the 27-member currency bloc.
But why would a nation as renowned for political as well as financial stability like Switzerland desire the euro? The chief benefit is for its export sector. Swiss companies including watch marker Hublot have complained recently about the strong Swiss franc weighing on their competitiveness. And watch markets are not alone. Exporters in sectors as diverse as cheese and chocolate to engineers, pharma companies and chemical firms are all suffering from the same problem: a strong franc.
As planned negotiations between the Vatican and the ultra-traditionalist Society of Saint Pius X (SSPX) near, the group's Swiss leader, Bishop Bernard Fellay, has spelled out his view of what the Roman Catholic Church must do to resolve the crisis he believes it is in. "The solution to the crisis is a return to the past," he has told a magazine published by the SSPX in South Africa. (Photo: Bishop Fellay in Ecône, Switzerland, 29 June 2009/Denis Balibouse)
Fellay said Pope Benedict agrees with the SSPX on the need to maintain the Church's links to the past, but still wants to keep some reforms of the Second Vatican Council (1962-1965). "This is one of the most sensitive problems," he said. "We hope the discussions will allow us to dispel the grave ambiguities that have spread through the Catholic Church since (the Council), as John Paul II himself recognised."
UBS, Switzerland and the United States can all claim a sort of victory from the settlement on Wednesday of their tax dispute.
UBS gets to avoid a fine that -- according to the Swiss justice minister -- would have threatened its existence. The Americans get the details of some 4,450 accounts that they say have held up to $18 billion, on which fat taxes may be payable. And the Swiss get to draw a line under a threat to their fundamental banking secrecy.
Lufthansa <LHAG.DE> is milking an antitrust standoff with the European competition regulators to extract maximum cost cuts from Austrian Airlines <AUAV.VI> as it seeks to cement its dominance of central Europe's skies.
The German flag carrier has held back key concessions to the European Commission needed to secure approval for the takeover of the ailing airline while it squeezes further concessions from Austrian's workforce and its biggest shareholder, the Austrian government. It won another 150 million euros in savings from job cuts agreed in a third round of AUA cost-cutting this week.
The EU regulator, which supports airline consolidation in principle, is right to insist that the creation of a central European mega-carrier should not be at the expense of consumer choice on key routes such as Vienna-Frankfurt.
Lufthansa, which has set its own deadline of July 31 to clinch the deal, has the Austrians in a tight spot because the cost to the Austrian taxpayer would be far higher if it walked away. The Austrian government holding company, OIAG, says this could cost about 1,400 jobs and imply total costs of 840 million euros. The state has promised to assume 500 million euros of AUA's 1 billion euros of debt as part of a Lufthansa deal.
The German giant needs to reduce the cost of acquisitions it launched last year before the financial crisis hit air travel.
It has already beaten down Sir Michael Bishop to lower the cost of his majority stake in British carrier BMI [BMI.UL] and has snapped up Brussels Airlines, the successor to bankrupt Belgian flag carrier Sabena.
In the latter case, Lufthansa made concessions to the Commission on routes and take-off and landing slots to avoid restricting competition. But it has balked so far at the most important remedies for the Austrian deal, which concern what would be a monopoly on nine daily flights between Vienna and Geneva, operated jointly with another subsidiary, Swiss, and above all on feeder flights to its Frankfurt Airport hub to connect with its more lucrative transatlantic routes.
If the Commission does not stand firm on these issues, it risks being overturned by the EU's Court of First Instance, to which rivals Air France-KLM <AIRF.PA> and former Formula 1 racing ace Niki Lauda's latest venture, Fly Niki, would undoubtedly appeal.
Of course, Lufthansa could let the Austrian deal founder on EU competition concerns in hopes of picking up the pieces of a shrunken or bankrupt AUA later. But it might face competition were the airline's assets to be sold out of bankruptcy. Both Air France and a consortium of Air Berlin and Fly Niki were interested last time.
So the betting must be that, as with the Belgian deal, it will yield to Brussels' demands to clinch the deal in the end.