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Italy calls for Swiss calm after bank raids

October 29, 2009

By Guy Dinmore in Rome and Haig Simonian in Lugano, Switzerland. Published on FT on Oct 29, 2009

Italy yesterday urged Switzerland not to retaliate over their deepening tax and banking dispute  after Italian finance police raided local branches of Swiss banks and stood accused of spying on Italians holding secret accounts across the border.

“Counter-measures certainly do not help,” Franco Frattini, Italian foreign minister, told reporters, while also trying to calm matters by assuring Swizerland that it was not being discriminated against and that bilateral relations remained “excellent”.

Billions of undeclared euros – estimates range from upwards of 125bn — held by Italians in Swiss banks are the focus of attempts by Italy’s cash-strapped centre-right government to repatriate funds under a generous tax amnesty passed by parliament this month.

Unlike most other western nations where Italians can benefit from the amnesty by paying a 5 per cent penalty and keep their funds abroad, deposits held in Switzerland and several smaller banking havens must be repatriated to Italy. Switzerland has responded angrily at being singled out, noting that its cooperation had recently removed it from an OECD “grey list” of tax havens.

Giulio Tremonti, Italian finance minister and a tax lawyer who is the architect of the third tax amnesty by a Berlusconi government, yesterday expressed satisfaction with flows of capital returning to the Italian economy and banking system. He gave no figures. Businessmen point to overbooked luxury restaurants in Rome as anecdotal evidence of money flowing back.

Responding to prominent critics – including Mario Draghi, governor of the Bank of Italy, and anti-mafia magistrates – that the amnesty ignores money laundering, Mr Tremonti disclosed that “fundamental changes” would be made in that respect.

Switzerland on Wednesday summoned Italy’s ambassador, Giuseppe Deodato, to express its “surprise” over unannounced checks made by Italy’s finance ministry police on 76 branches of mainly Swiss banks in 25 Italian cities on Tuesday. Pascal Couchepin, Swiss interior minister, was quoted in Italian newspapers as describing the checks as “discriminatory” and “pillaging”.

Italian finance police – dubbed 007s – have installed video cameras at the Chiasso border crossing to record licence plates of passing vehicles. Swiss newspapers have also accused the Italian authorities of spying on Italians on trains inside Switzerland. Such surveillance and the spot checks on the Swiss bank branches are widely seen as aimed at intimidating Italians into withdrawing their funds.

Feelings are running high in Lugano, the banking centre of Switzerland’s Italian-speaking Ticino region, especially after Mr Tremonti said earlier this month he wanted to “dry out” the main source of Italian money held abroad.

“The way Italy is trying to enforce the amnesty by attacking Switzerland has gone beyond Lugano and Ticino and has turned into a Swiss national issue. Everyone now realises the problem lies in relations with Italy,” Alfredo Gysi, chief exsecutive of BSI, Ticino’s biggest bank., told the FT.

He said he understood the approach of dialogue taken by Hans-Rudolf Merz, Swiss finance minister and president, but added: “No one should act impulsively but the right approach now is to a willingness to take a tough position.”

Swiss bankers say Italians hold the dominant share of an estimated total worth 185bn Swiss francs deposited in Ticino. Italian bankers estimate Italians own about 300bn euros in undeclared funds worldwide, while estimates of total Italian deposits in Switzerland range up to 600bn euros. Bankers stress that no one really knows.

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