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Sovereignty Squabble

DW staff (jc)February 19, 2008

Liechtenstein's hereditary prince, next in line to head the tiny Alpine country, has said that Germany broke the law and violated the state's sovereignty by paying an informant for data on alleged German tax evaders.

Prince Alois
The prince is not amused at Germany's tax probeImage: AP

Prince Alois' comments came at a press conference on Tuesday, Feb. 19, amidst a German probe into whether many of Germany's top executives used bank accounts in Liechtenstein to conceal assets from tax authorities.

"Spying on our clients is unthinkable," Prince Alois said. "Does a state have the right to obtain information by breaking the law in a friendly state and probably also contravening its own laws?"

Information purchased by Germany's foreign intelligence agency, the BND, from an as-yet unnamed source led to the resignation of Deutsche Post CEO Klaus Zumwinkel on Feb. 15. He and hundreds of other wealthy Germans are now the subject of a tax-evasion inquiry.

Prince Alois said that the probe encroached upon the sovereignty of his country and that Liechtenstein would fight back.

"We'll be considering further legal steps to protect our citizens and investors from these sorts of investigatory methods, which do not conform to Liechtenstein law," he said.

The prince also said that the information, for which the BND paid between 4 and 5 million euros ($6-7.5 million), was likely a list of clients at the LGT bank group stolen by a former bank employee in 2002.

A mouse that's roaring

Castle in Liechtenstein
Liechtenstein is both picturesque and extremely business-friendlyImage: AP

But it's not just Liechtenstein's monarchy who is hopping mad at how the German government came by the incriminating data.

"I find it strange, to say the least, that German officials handed over money to a criminal in order to obtain stolen goods in his possession," Liechtenstein state prosecutor Robert Wallner told the Berliner Zeitung newspaper.

Wallner added that his office was looking into possible legal action against the person who sold the information.

But Liechtenstein -- a tiny principality with around 35,000 citizens and roughly twice as many registered companies -- is known for its business friendly tradition of banking secrecy and is often considered a tax haven.

Liechtenstein's leadership is trying to portray the asset-concealment scandal as a case of one of Europe's largest countries running roughshod over one of its smallest.

"Germany has clearly failed to understand how one behaves toward a friendly state," Prince Alois said. "We are a small country and we want good relations with our neighbours, but we are also a sovereign state."

But German Chancellor Angela Merkel has said she will press Liechtenstein's Prime Minister Otmar Hasler for better cooperation in uncovering tax fraud, when the two leaders meet on Wednesday in Berlin.