EU meeting to pile pressure on Austrian bank secrecy

DUBLIN Fri Apr 12, 2013 1:10am BST

1 of 2. A woman takes a deposit box out of a compartment in the safe room of an Austrian bank in Vienna April 10, 2013.

Credit: Reuters/Heinz-Peter Bader

DUBLIN (Reuters) - Austria will come under renewed pressure to prise open its bank secrecy rules at a two-day meeting of European Union finance ministers, starting on Friday, that will also seek to contain the fallout of a messy bailout of Cyprus.

The gathering in Dublin follows Luxembourg's decision this week to share foreign bank account details with the holders' home EU governments from 2015, bringing it into line with all other countries in the bloc bar one - Austria.

In a last-minute addition to the meeting's agenda, Ireland, which as holder of the EU presidency chairs the event, said ministers will discuss a project by the bloc's five largest economies to deepen cooperation on tackling tax evasion.

This discussion could see some frank exchanges between Germany, whose finance minister Wolfgang Schaeuble campaigned against bank secrecy, and his outspoken Austrian peer Maria Fekter, who had promised to fight "like a lion" to keep it.

On Thursday she criticised others including the United States and Britain for permitting tax havens in places such as Delaware and the Channel islands.

Ministers are also set to debate the chaotic bailout of Cyprus, after Reuters and others obtained documents detailing the heavy burden it imposes on one of the bloc's smallest countries.

Whereas Nicosia was originally meant to come up with 7 billion euros (5.9 billion pounds), and the European Union and International Monetary Fund would provide 10 billion, the documents show the package will now cost 23 billion euros, with Cyprus providing 13 billion of that.

Cyprus is also expected to sell 400 million euros' worth of gold reserves, and will have to raise corporate tax and capital gains tax rates at a time when its economy is forecast to shrink more than 12 percent in the next two years.

While details of the programme have already been agreed between Nicosia, the EU and IMF, Finland's finance minister said on Wednesday there was still potential for minor adjustments.

The Dublin meeting is a so-called informal gathering - firstly of finance ministers for the euro zone countries, then for the full EU 27 - and no decisions are expected.

It will also provide the opportunity to examine the deepening problems in Slovenia and debate how to press ahead with setting up a "banking union" across the euro zone.

Banking union is considered a critical long-term reform since it addresses how to cope with future crises, touching on issues such as shutting down or salvaging bad banks, pan-European deposit protection and establishing a resolution fund to pay for the clean-up.

But momentum has slackened in part because of German concerns, as the euro zone's biggest economy, that it could be left on the hook for banks across the bloc.

Michel Barnier, the European commissioner in charge of regulation, said he hoped ministers would "redouble" efforts on banking union and tackling tax havens.

Part of this debate concerns possible direct recapitalisation of banks by the euro zone's bailout fund - a step meant to break the vicious circle between indebted governments and shaky banks.

Ireland, which hopes to exit its bailout programme this year, fears this promise, made by euro zone leaders, may never be fulfilled.

"It's possible that Irish banks need capital in the future," said Philip Lane, an economist with Trinity College Dublin. "If ever the ESM should be used for direct bank recapitalisation, it should be used for Ireland. It's a poster boy."

Ministers are expected, however, to endorse extending the time that Ireland and Portugal get to repay EU loans they received in their bailouts.

(Additional reporting by Conor Humphries; Editing by Will Waterman)

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