SWISS REACTION TO UBS AGREEMENT \

2009-08-20 15:10:00 09BERN350 Embassy Bern CONFIDENTIAL 09BERN68 VZCZCXYZ0000\ RR RUEHWEB\ \ DE RUEHSW #0350/01 2321510\ ZNY CCCCC ZZH\ R 201510Z AUG 09\ FM AMEMBASSY BERN\ TO RUEHC/SECSTATE WASHDC 6015\ INFO RHMFISS/DEPT OF JUSTICE WASHINGTON DC\ RUEATRS/DEPT OF TREASURY WASHINGTON DC\ C O N F I D E N T I A L BERN 000350 \ \ SIPDIS \ \ DEPT OF JUSTICE FOR B.SWARTZ, \ L/EB FOR K.KIZER AND W.TEEL \ \ E.O. 12958: DECL: 08/19/2019 \ TAGS: ECON EFIN PREL SZ SUBJECT: SWISS REACTION TO UBS AGREEMENT \ \ REF: BERN 68 \ \ Classified By: DCM L.Carter for reasons 1.4(b) and (d). \ \ ¶1. (C) Summary. President and Finance Minister Hans-Rudolf \ Merz, Justice Minister Eveline Widmer-Schlumpf, and Foreign \ Affairs Minister Micheline Calmy-Rey in an August 19 press \ conference praised the UBS agreement as the only possible \ solution and a "Peace Treaty." The Ministers were quick to \ limit the reach of the agreement to UBS only, although the \ Justice Minister recognized the agreement could open the door \ for similar requests from other Swiss banks if those banks \ committed similar egregious acts like UBS. Media \ commentators and political pundits covered a range of \ opinions from declaring the agreement a true victory for the \ U.S. to an absolute win for Switzerland. Unlike the media, \ local business leaders and the Swiss Bankers Association \ universally expressed relief that the UBS case was resolved. \ The UBS case had been a dark cloud over bilateral relations, \ with concerns it could escalate to a seriously damaging event \ similar to the Holocaust asset case a decade ago. Current \ Swiss opinion indicates, however, that the agreement will \ mollify all but the most anti-American voices and leave our \ bilateral relations relatively unscathed. End Summary. \ \ -------------- \ FEDERAL COUNCILLORS PRAISE RESOLUTION, GOOD BILATERAL \ RELATIONS \ -------------- \ \ ¶2. (U) President and Finance Minister Hans-Rudolf Merz, \ Justice Minister Eveline Widmer-Schlumpf, and Foreign Affairs \ Minister Micheline Calmy-Rey discussed the resolution of the \ UBS case in a press conference on August 19. Widmer-Schlumpf \ touted the bilateral agreement as the only possible solution. \ She commented that it was necessary to preserve the Swiss \ legal system against the unilateral enforcement of US \ regulations, which could include freezing UBS' US-based \ assets. Calmy-Rey called the agreement a "Peace Treaty" and \ praised the good Swiss connections with the US for making the \ agreement possible. While President Merz emphasized that the \ agreement only applied to the specific case of UBS, Widmer- \ Schlumpf countered that the tax treaty language "tax fraud \ and the like" coupled with the recently adopted OECD \ standards for administrative assistance could open the door \ for similar requests for information from other Swiss banks \ if those banks had committed similar egregious acts like UBS. \ President Merz, who previously expressed regret at UBS' \ unacceptable actions (reftel),appealed to Swiss banks to \ respect U.S. laws and the Qualified Intermediary regulations. \ \ -------------- \ NO CLEAR TREND IN MEDIA OPINIONS \ -------------- \ \ ¶3. (U) Media commentators and political pundits covered a \ range of opinions from declaring the agreement a true victory \ for the U.S. to an absolute win for Switzerland. Neither the \ political persuasion of the papers nor the region of the \ country defined a clear Swiss opinion about the effects of \ the agreement. Newspaper articles ranged from claiming the \ broader interpretation of "tax fraud and the like" in the tax \ agreement was the "last nail in the coffin of banking \ secrecy" to citing legal experts that announced Switzerland \ had been the clear winner because Switzerland's legal \ procedures had not been compromised. Another paper took a \ completely different approach arguing that even though the \ agreement was the only tenable solution, it placed undue \ pressure on Switzerland's governmental system of separation \ of powers between the Federal Council and the Tax \ Administration Court. \ \ -------------- \ BUSINESS RELIEVED BY AGREEMENT \ -------------- \ \ ¶4. (C) Unlike the media, business leaders universally \ expressed relief that the UBS case was resolved. Swiss \ American Chamber of Commerce CEO Martin Naville told econoff \ that the agreement was a positive outcome for two reasons: 1) \ the agreement was signed under a partnership spirit without \ the adversarial tone expressed in previous months; and 2) the \ exchange of information will be in accordance with the double \ taxation treaty. He highlighted that political will to \ ratify the recently revised treaty would not exist if the IRS \ did not conform to the requirements of the original treaty. \ Naville expected there to be some domestic policy noise about \ Switzerland relinquishing its sovereignty and its tradition \ of bank secrecy, but these opinions would not cloud the \ positive impact of the resolution. \ \ ¶5. (C) Thomas Pletscher, Executive Board Member of \ EconomieSuisse, Switzerland's largest umbrella organization \ for Swiss business and industry, echoed Naville's sentiments \ calling the agreement a "relief." Pletscher stated that the \ overall industry response had been positive. He told econoff \ that a long drawn out court case posed "a danger of \ overshadowing" and "seriously damaging" otherwise good \ bilateral relations. In addition, the agreement established \ a procedure to avoid a clash of the two countries' legal \ frameworks. Pletscher was not concerned about the agreement \ breaching Switzerland's banking secrecy. He stated that the \ agreement marked the "end of Hollywood's version of banking \ secrecy" which was always an inaccurate portrayal. Banking \ secrecy was designed to protect individual privacy, not to \ hide criminal conduct. \ \ ¶6. (C) The Swiss Bankers Association's Head of U.S. Affairs \ Heinreich Siegmann reiterated the relief that the complicated \ matter had been resolved amicably and within the Swiss legal \ framework. Siegmann informed econoff that maintaining the \ stability of Swiss law was crucial to the continuing success \ of the Swiss financial center. \ \ -------------- \ COMMENT \ -------------- \ \ ¶7. (C) Post expects that the UBS case will provide the \ Swiss media fodder for claiming the U.S. bullied Switzerland \ into an agreement that marks the demise of banking secrecy, a \ national heritage. However, Swiss government and business \ leaders generally view the agreement as a mutual compromise \ that protects Swiss sovereignty while enabling the U.S. to \ enforce its tax laws. The UBS case was a dark cloud over \ bilateral relations, with concerns it could escalate to a \ seriously damaging event similar to the Holocaust asset case \ a decade ago. Current Swiss opinion indicates, however, that \ the agreement will mollify all but the most anti-American \ voices and leave our bilateral relations relatively unscathed. \ BEYER \