Speaking last week, Taxation Commissioner, Frits Bolkestein warned that restrictions on investments by Swiss citizens in the European Union could be imposed if the jurisdiction fails to comply with the EU's demands over information exchange on the bank accounts of non-residents.

However, speaking to Reuters early this week, Luxembourg's Economic Affairs Minister, Henri Grethen announced his opposition to such a heavy-handed solution:

'The general exchange of information...it is not worth it to begin a political war with the Swiss or the other third countries,' he observed.

Mr Grethen revealed that the favoured option for the Luxembourg government would be to return to the 'co-existence model' of 1997, whereby a withholding tax was imposed on the savings of non-residents as an alternative to automatic information exchange.

However, as Luxembourg has agreed to exchange information only if Switzerland does likewise, the tiny jurisdiction would also want to impose a withholding tax, Mr Grethen explained following the informal meeting of EU finance Ministers last week.