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Cablegate: Swiss Reaction to Ubs Agreement

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

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 \

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