The country's banks and financial service providers warned in the wake of the announcement that the CGT extension, coupled with a loosening of German banking secrecy would make the country far less competitive in attracting investment. These predictions now appear to be coming to pass.

According to a report from business intelligence provider, the Lafferty Group on Tuesday, between 30 billion and 40 billion euros worth of German investor funds have fled the country since it emerged that the 15% capital gains tax would be extended to all securities transactions in February 2003.

Speaking to Lafferty this week, Commerzbank chief executive, Klaus-Peter Muller revealed that the increased compliance burden as a result of the loosening of secrecy laws will set the bank back something in the region of 50 million euros per year.

German stock exchange, Deutsche Börse has also reportedly condemned the plans, arguing that they will 'negatively affect' Germany's reputation as an international finance centre.

'This will obstruct the capital market as an engine for growth and jobs,' Lafferty quoted the exchange as observing recently.