The EU is keen to negotiate a system of information exchange on cross-border savings with non-EU countries such as the United States, Liechtenstein, San Marino, Monaco, Andorra, and of course Switzerland, as without their co-operation, the Union's own attempts at tax harmonisation on savings income will be seriously undermined.

However, although Switzerland has been politely helpful, offering to extend its 35% withholding tax on resident savings income to non-resident account holders, the government is adament that it will not shift on the issue of banking secrecy. The Finance Minister, Kaspar Villiger confirmed this, commenting recently that: 'Banking secrecy is not negotiable'.

Jean-Baptiste Zufferey, a Swiss tax expert and professor at the University of Fribourg expresses the situation more bluntly: 'It's not because we fear banks would lose business, but most Swiss people have an attachment to the idea that a human being is entitled to financial privacy. It is the problem of foreign countries if they cannot tax their citizens. We in Switzerland don't have to help other countries do their job.'

This poses a serious problem for the EU- not just because the alpine jurisdiction is home an estimated one third of the world's offshore wealth, but because other countries, in particular Luxembourg and Austria, have said that they will refuse to back information exchange plans if Switzerland does not participate.

The debate looks set to run and run, as now that the EU finance ministers have reached agreement on Tuesday on the mandate to open formal negotiations on the issue, the ball is back in the Swiss court again. The country must now formulate a proposal setting out the arguments for keeping strict banking secrecy measures in place, a process which the banking industry believes could take some time.