As things stand at the moment, Luxembourg, Austria, and Belgium have been granted a seven year transitional period, during which they will not be required to disclose information to other EU member states, but will instead impose a withholding tax on interest payments. However, even at the end of the seven year grace period, none of the countries in question are prepared to cede any kind of advantage to offshore financial centres such as Switzerland.

'We can only accept what will be done in Switzerland,' the Luxembourg Economy Minister, Henri Grethen insisted last week. 'Europe would not have made progress if there is capital flight to Switzerland.' However, his Austrian counterpart, Karl-Heinz Grasser sounded a more optimistic note, although he stressed that Austria was not going to back down on this issue, and reiterated that the European Union would have to address the concerns of the rogue member states: 'As all the member states want to have taxation of savings income I think a compromise should be possible,' he said on Thursday.

Following the ECOFIN meeting, however, it appeared that some form of consensus had been reached, although it seems that the gist of the agreement is that the European Union members will agree to disagree for another twelve months. The text of the agreement on the taxation of savings interest states that the European Commission will begin negotiations with non-member states, and the European Union will decide, by December 31 2002, whether to implement a directive stipulating that banking secrecy be relaxed in the case of non-resident savings accounts.