A Swiss decision to issue arrest warrants for three German tax inspectors for espionage has left Berlin scrambling to salvage a landmark deal on taxing offshore accounts in Switzerland.
Angela Merkel is already struggling to get political support for the pact with the opposition SPD declaring the it does not go far enough.
The tax inspectors are accused of buying a CD full of secret data about German tax dodgers.
While Switzerland is on the verge of agreeing to a levy on undeclared German money held in Swiss accounts, eventually handing it over to Berlin, the alleged German espionage has angered the Swiss government.
Switzerland’s strict bank secrecy code has helped it build a major offshore financial sector and the pact with Germany would protect this banking tradition.
while helping Berlin recover lost revenue.