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The Austrian government is getting ready to give in to European reality. Vienna will join Luxembourg in discussions on loosening the protection of bank secrecy. After Cyprus, the two holdouts had little choice.
National bank secrecy is already history in the EU, with the exception of Austria and Luxembourg. The EU Savings Directive mandates the automatic exchange of information on EU residents' bank accounts. Luxembourg's Finance Minister recently signalled his country was backtracking on opposition. Now Austria is wavering.
Chancellor Werner Faymann said Austria would join Luxembourg, although he stressed that only foreigners holding accounts in Austria would be subject to investigation. Finance Minister Maria Fekter seems even less keen, saying she would fight "like a lion" to keep bank accounts private, as they have been traditionally under the country's constitution. A constitutional amendment will be required to change bank secrecy laws, and that may be a snag, especially before national elections in September.
The Austrians can point out that bank secrecy protects clients from oppressive governments. But for money flowing in from other EU members, the desired protection is usually from legitimate demands for tax payments.
The banks have something to lose. But if the Austrians yield on EU deposits – around a 10th of the total – they will be in a better position to defend secrecy for the more lucrative business from central Europe. What's more, since Austria's banking system still looks fairly strong, it will remain a popular destination for foreign cash, even with reduced secrecy.
The EU has more to gain. Restrictions on secrecy should lead to higher tax revenues and more respect for the rule of law. The Cypriot bailout drama has discredited bloated banking sectors. Increased transparency throughout the EU will help reduce the chances of a repeat.