VADUZ, Feb 19, 2008 (AFP) — Liechtenstein's Crown Prince Alois on Tuesday accused Germany of launching an attack on the principality's sovereignty by paying an informer for bank details in a massive tax fraud probe.
"Germany has clearly failed to understand how one behaves towards a friendly state. We are a small country and we want good relations with our neighbours but we are also a sovereign state," the prince said.
"Germany will not solve its problems with its tax payers by attacking Liechtenstein. Germany has the worst tax system in the world," he told a press conference aired on German television.
Prince Alois accused Germany of using "draconian methods that defy the rule of law" as it sought to uncover tax evasion by its elite said to involve four billion euros (5.8 billion dollars) placed in accounts in the tiny principality that lies between Switzerland and Austria.
"We are going to see what we can do to protect our citizens and also our investors, who trust us, against such methods of investigation," he said.
The prince's blistering attack comes a day after Berlin admitted paying an unnamed informant between four and five million euros for information on tax fraud leading to banks in Liechtenstein.
Finance Minister Peer Steinbrueck has also admitted calling in the help of Germany's foreign intelligence agency to investigate the tax evasion case that has put banking secrecy in Liechtenstein under the spotlight.
The crown prince said his country, widely considered a tax haven, had a right to protect the secrecy of banking details and accused Germany of breaking the law.
"Spying on our clients is unthinkable. The principle of confidentiality also applies to our foreign clients.
"Does a state have the right to obtain information by breaking the law in a friendly state and probably also contravening its own laws? Since when is it illegal for Germans to place their money in trusts?"
Tension over the tax probe is expected to dominate talks between German Chancellor Angela Merkel and Liechtenstein Prime Minister Otmar Hasler in Berlin on Wednesday.
Merkel has signalled she would press Hasler for greater transparency, saying "of course, we are going to talk about questions that still have to be settled, including details on regulation of banks and foundations."
Liechtenstein's LGT bank group last week said it believed that German finance authorities are working from a list of its clients stolen by an employee in 2002.
The state prosecutor in Liechtenstein said in an interview with a German newspaper published on Tuesday that justice authorities in the principality were investigating charges against the unnamed whistle-blower.
"I find it strange, to say the least, that German officials handed over money to a criminal in order to obtain stolen goods in his possession," state prosecutor Robert Wallner told the Berliner Zeitung.
The prosecutor said he was investigating charges "against an unknown suspect for violating business secrets."
The methods used by German investigators to uncover the biggest tax scandal in the country's history has also caused controversy at home.
A lawyer for former Deutsche Post chief Klaus Zumwinkel, who quit last week after he was implicated in the scandal, said it was unlikely that evidence would stand up in court if was obtained through theft.
But the finance ministry has insisted that it acted within the law and that the information it paid for could be used in court.
"We behaved correctly," said Steinbrueck.
He has accused "greedy" members of the German elite of defrauding the state of hundreds of millions of euros through secret bank transactions.
More prominent heads are expected to roll after German investigators on Monday began raiding homes and companies across the country in the probe said to target nearly 1,000 suspects.
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