DAS GARBER'S MEETINGS WITH SWISS AND LIECHTENSTEIN

UNCLAS BERN 000552 SENSITIVE SIPDIS DEPT FOR EUR (J.GARBER),EUR/CE (Y.SAINT-ANDRE),EUR/ERA, AND EB; PLEASE PASS TO USTR FOR J.BUNTIN E.O. 12958: N/A TAGS: ECON ETRD EFIN SZ SUBJECT: DAS GARBER'S MEETINGS WITH SWISS AND LIECHTENSTEIN OFFICIALS (OCT 20-21) REF: A. BERN 544 ¶B. BERN 546 ¶1. (SBU) Summary: During an October 20 meeting with DAS Garber, senior Swiss Department of Foreign Affairs (EDA) contacts outlined their priorities for U.S.-Swiss relations. EDA Americas Division Head Yvonne Baumann requested support for another round of senior-level U.S.-Swiss bilateral meetings under the rubric of our MoU-based "Framework for Intensified Cooperation." Muslim issues, human rights, the Balkans, the Middle East, disarmament and nonproliferation, UN sanctions implementation, the OSCE, the Caucuses, and Russia/Georgia were identified by the Swiss officials as potential areas for continued U.S.-Swiss coordination. Swiss officials at the State Secretariat for Economic Affairs (SECO) informed DAS Garber that they were happy with the progress under the Trade and Investment Cooperation Agreement, including the recent signing of the E-Commerce Declaration and the soon-to-be finalized Safe Harbor Agreement. Swiss Department of Finance officials commented that, while the GOS lowered their initial 2008 growth forecast of 1.7 percent to less than 1 percent due to the underestimated impact of the financial crisis on the EU, the GOS is not pessimistic overall. Liechtenstein's Ambassador to Switzerland told DAS Garber October 21 that Liechtenstein is at an advantage with regard to the financial crisis because the country is not an investment banking center so was not impacted by the first wave of write-downs. With respect to ongoing discussions with Liechtenstein regarding banking secrecy, DAS Garber emphasized that worldwide trends toward greater connectivity and the increasing use of financial networks by inappropriate individuals and organizations require that all countries work together to stop nefarious activity. End Summary. -------------- SWISS EDA EMPHASIZES DIALOGUE -------------- ¶2. (SBU) During an informal October 20 lunch meeting hosted by Department of Foreign Affairs (EDA) Americas Division Head Yvonne Baumann for EUR DAS Judith Garber, senior Swiss EDA contacts outlined their priorities for U.S.-Swiss relations. Ambassador Baumann reviewed the history of bilateral meetings held under the rubric of our MoU-based "Framework for Intensified Cooperation." Emphasizing that there is an "abundance of issues of common interest," she requested DAS Garber's support for a next senior-level Framework meeting in Bern. Baumann added that the EDA would like to organize an experts-level Framework meeting ("Joint Working Group") in Switzerland soon. She remarked that "the U.S. delegations need not be large," but continuing such meetings would allow us to "meet the commitment we made when we started this initiative." DAS Garber responded that in light of the transition, it is not possible to schedule senior USG officials now, but it should still be possible to explore options for a next JWG meeting. ¶3. (SBU) EDA Human Security Division Head Thomas Greminger identified Muslim Issues, Human Rights dialogue exchanges (e.g., China),the Balkans (particularly Kosovo),and the Middle East as areas for continued U.S.-Swiss coordination. EDA Director for Security Affairs Jacques Pitteloud said that CT and intel cooperation are ongoing and will remain so in their respective channels. At the political level, he flagged increasing GOS concern about the NPT, with a view to the 2010 Review Conference (RevCon). Ambassador Pitteloud projected that Switzerland increasingly will emphasize nuclear disarmament issues in the run-up to the RevCon, fearing that without more progress on disarmament, it will be increasingly difficult to achieve nonproliferation goals. ¶4. (SBU) Ambassador Christine Schraner-Burgener, EDA Coordinator for Counterterrorism, emphasized Switzerland's support for a proposal it has made along with several other countries to develop a review panel that would provide expert, non-binding advice to the UNSCR 1267 Sanctions Committee regarding whether certain individuals should be removed from the sanctions list. Schraner-Burgener regretted that the proposal has not received more support in the UNSC, noting that the GOS would appreciate USG support. She expressed concern that European court decisions might create dilemmas for countries seeking to enforce the sanctions while meeting their human rights obligations. ¶5. (SBU) EDA European Affairs Division Chief Christian Meuwly observed that the GOS had firmly supported Kosovo independence and would remain engaged there. He said that he would welcome more dialogue with the USG regarding the Caucuses and mentioned that he would be very interested in meeting with DAS Bryza soon. Meuwly referred to the OSCE's current difficulties and suggested that thought perhaps should be given to holding a summit in 2010 to seek to reaffirm the values and principles of the organization. Meuwly noted that Switzerland is setting up an Interest Section for Russia in Georgia. He said that the GOS is not doing this for self-promotion, but "because Switzerland is still a 'brand name' for this kind of work," and because it provides an opportunity for Georgia to have an Interest Section (managed by Sweden) in Moscow, to assist the approximately 750,000 Georgians living in Russia. -------------- BILATERAL TRADE TIES STRONG -------------- ¶6. (SBU) The Swiss Department of Economic Affairs (SECO) Deputy Head of Bilateral Economic Affairs Erwin Bollinger, Deputy Head of Americas Bilateral Economic Relations Guido Barsuglio, and Deputy Head of Taskforce Sanctions Thomas Graf informed DAS Garber October 20 that they were happy with the progress under the Trade and Investment Cooperation Agreement, including the recent signing of the E-Commerce Declaration by USTR Schwab and Economic Affairs Minister Doris Leuthard and the soon-to-be finalized Safe Harbor Agreement. SECO hopes the Safe Harbor Agreement will be concluded by the end of November. Other than referencing on-going dialogue with U.S. Department of Agriculture to gain import access to the U.S. beef market, SECO described bilateral economic relations as "perfect." -------------- SWISS OPTIMISTIC ABOUT FINANCIAL CRISIS -------------- ¶7. (SBU) Department of Finance Deputy Head of International Finance and Monetary Policy Division Urs Plavec and Senior Economist and Deputy Head of Economic and Monetary Policy Barbara Schlaffer met with DAS Garber October 20 to discuss the current financial crisis. Plavec stated that while the GOS lowered their initial 2008 growth forecast of 1.7 percent to less than 1 percent due to the underestimated impact of the financial crisis on the EU, the GOS is not pessimistic overall. He commented that he "does not expect a severe recession." Plavec expects growth to be back to normal by 2009 (normal being 1.5-2.5 percent.) ¶8. (SBU) In defense of this rather optimistic position, Plavec pointed out that while they are pessimistic about EU exports in general, many of Switzerland's exports are "inelastic to the business cycle, such as pharmaceuticals," and will not be affected. In addition, he noted that Switzerland did not have a housing sector bubble or a credit crunch. Swiss banks are well-capitalized so the global credit freeze left domestic credit and housing lines unaltered. In pointing to somewhat out-dated August figures, Schlaffer mirrored Plavec's optimism by stating that consumption was up, the labor market was strong, and that the large contraction of industry purchasing power would not greatly affect Switzerland because the service sector strongly out-distances industry as the largest contributor. In addressing the need for Switzerland's first rescue package for its largest bank, UBS, Plavec cited bolstering confidence as the impetus for the assistance (reftels). Plavec conceded that all of this optimism is dependent on the expected success of the EU and US global rescue plans. ¶9. (SBU) Plavec suggested that global meetings to respond to the crisis should include the BRIC countries and the BrettQWoods insitQs. Measures to be addressed, according to Plavec, include CEO salaries and the need to minimize overreactions; "Allow markets to play, but don't allow market failures." -------------- LIECHTENSTEIN WATCHING FINANCIAL CRISIS -------------- ¶10. (SBU) According to Liechtenstein Ambassador to Switzerland Hubert Buchel, the financial crisis has not yet affected Liechtenstein. In an October 21 meeting with DAS Garber, he commented that Liechtenstein is at an advantage because it is not an investment banking center so was not impacted by the first wave of write-downs. The banks also have a large capital basis to fall back on. He did note that the global solution to the crisis is still crucial because these banks are affected by the declining stock markets. Buchel remarked that Liechtenstein has no power to influence the global situation so the country's banks are just following the market and will rely on the Swiss National Bank (SNB) as lender of last resort, if necessary. (Note: Liechtenstein does not have a central bank. The country's banks report to and are assisted by the SNB in accordance with a bilateral currency treaty. End Note) ¶11. (SBU) With respect to ongoing discussions with Liechtenstein regarding banking secrecy, DAS Garber emphasized to Buchel that worldwide trends toward greater connectivity and the increasing use of financial networks by inappropriate individuals and organizations require that all countries work together to stop nefarious activity. Buchel acknowledged that in criminal cases, accounts must be open. He commented that the original view in Liechtenstein was that tax issues revolved around varying definitions of tax fraud and tax evasion, and that tax issues were not banking issues, but relegated to client responsibility. He confirmed that this view has changed to one that recognizes the importance of international exchange at the EU and bilateral level. CONEWAY