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Cablegate: Das Garber's Meetings with Swiss and Liechtenstein

VZCZCXYZ0008
RR RUEHWEB

DE RUEHSW #0552/01 3030934
ZNR UUUUU ZZH
R 290934Z OCT 08
FM AMEMBASSY BERN
TO RUEHC/SECSTATE WASHDC 5407
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC

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

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