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European Union

Luxembourg resists tax clampdown as EU makes progress on closing banks

Luxembourg has stalled European Union efforts to crack down on tax evaders. Finance ministers from EU countries have though made progress on setting up an agency to control rogue banks.

European bank secrecy crumbling

In meetings held in Brussels on Tuesday, EU finance ministers once again failed to get the unanimous approval needed to approve long-delayed legislation covering bank data exchanges, which would allow governments to better identify and chase tax evaders.

Luxembourg, a duchy of 500,000 people which has long benefited from its secretive banking culture, fears losing its appeal as a banking destination if other finance havens such as Switzerland did not agree to the same standards. Because of Luxembourg's resistance, the decision was pushed to a summit of European Union government leaders, due to be held next week.

"We've been working on this for such a long time, whether we agree today or in four weeks, that doesn't kill me either," German Finance Minister Wolfgang Schäuble said, adding he was confident Luxembourg would drop its opposition.

Cross-border tax avoidance schemes and other types of tax fraud, such as the case of Bayern Munich President Uli Hoeness which is currently playing out in court, is estimated by EU officials to cost governments in the bloc 1 trillion euros ($1.4 trillion) each year.

Progress on banking union

Meanwhile, the finance ministers on Tuesday drafted compromise proposals on a scheme to shield taxpayers from bank bailouts. The so-called "single resolution mechanism" would involve setting up an agency which could close down failing banks.

Its aim is to stabilize the financial system and restore faith in the euro currency following the bloc's sovereign debt crisis.

The proposals are due to be presented to lawmakers on Wednesday in Strasbourg. They would need to be agreed on by the EU government and European leaders by the end of March, if long delays are to be avoided due to the upcoming European Parliament election in May.

se/dr (Reuters, AP, AFP, dpa)

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