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Reporting on the Swiss and Liechtenstein financial centres
without getting involved in a controversy about the crisis
or tax evasion is becoming something of a challenge. Nonetheless,
that is what this fourth edition of BSL will attempt to do.
It seeks to provide first-hand information and analysis by
asking specialists to put their views.

Since our last edition, the markets have on occasion proved
their ability to keep a cooler and more astute head than some
would have us believe. Following the rescue of large financial
institutions in several industrialised countries, they have
shown a degree of optimism which many observers had not been
expecting, while still maintaining the sharpness of their
judgments; after all, they were not slow to point their finger
at the way in which some member countries of the euro zone
were allowing their public debt to slip out of control.

The first country concerned was Greece, which was at risk
of no longer being able to service its debt. After the ritual
denigration of speculators who were supposed to be responsible,
solutions had to be found. The traditional approach would
have been for Greece to negotiate debt restructuring with
its creditors, who would have abandoned some of their claims.
As a natural consequence, other countries also burdened with
debt would have experienced difficulty in finding creditors
willing to put up funds on reasonable terms and would soon
have found themselves in difficulty too.

To avoid such consequences and prevent some of Greece's creditor
banks based in the euro zone from being destabilised by defaults,
and therefore perhaps requiring new rescue packages, the partner
countries of Greece decided to come to its rescue together
with the International Monetary Fund (IMF). Loans spread over
three years have accordingly been approved for an amount in
excess of 100 billion euros. This measure was certainly desirable
to calm the markets, but has not escaped criticism, directed
primarily at the IMF, whose mission is to help members who
are experiencing a temporary balance of payments problem and
not to refinance their public debt.

There is a great danger that this solidarity might be tested
again by the markets on another occasion. In short, we are
caught between a rock and a hard place. These uncertainties
are compounded by doubts surrounding the new regulatory provisions
on financial intermediaries which have been drawn up in various
countries within the European Union and in the Basel Committee.
They concern capital adequacy, liquidity requirements and
risk management, in particular systemic risks, but also a
limitation of the leverage effect, with no relationship to
the risk incurred. Such a set of measures comes at a price
which will raise the cost of banking services. Quite apart
from the ban on the inclusion of bonuses in operating costs,
a punitive tax is about to be introduced in several countries.
It is a well-known fact that any additional costs imposed
on the financial sector end up being paid by investors.

After facing attack for welcoming assets that had not been
declared to their clients' national tax authorities, the financial
centres of Liechtenstein and Switzerland found themselves
obliged to take painful decisions: they could either remain
loyal to their client base and be exposed to intolerable retaliatory
measures or give in to the pressure and seek permission from
their authorities to satisfy foreign demands which were incompatible
with the ordinary legal process. To make sure that they were
never placed in such a situation again, financial intermediaries
are determined to confine their management in future to assets
which they can reasonably assume to have been declared and
to agree with those countries that will accept it a full withholding
tax on the income of their residents' assets, granting a release
from further tax liability. The development of a convincing
strategy is an important step towards escaping from the deadlock.

Familiarity with the state of the financial system, the opinion
of its players and the products they offer, does not remove
uncertainties - they are an integral part of economic life
- but does lay down important markers. Our authors attach
great importance to this approach and hope to guide you with
their clear, concise and objective analyses. That too is the
aim of our sponsors, who have given their support to our publication
year after year.
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