If you have been lucky enough to visit the small Alpine nation of Liechtenstein (lucky enough, that is, to visit it for just a few days, before suicidal boredom sets in) you know that, during the right time of year, you can ski and walk through green grass in the same day and without traveling more than 10 miles or leaving the narrow confines of the country's borders. It's small enough that you shouldn't need more than a few days at the Park-Hotel Sonnenhof to poke around the Rhine valley, or the Austrian alps, which border the principality to the East, and deposit millions of dollars you would prefer not to let Inland Revenue, the IRS, or your ex-wife know about. I suppose you have to envy David Crawford a little as the Wall Street Journal reporter sent to Vaduz, the capital city, to report on the country back in February. (Just in time for a little skiing in Lech, Austria, I suppose).
To foreigners, the landlocked island has essentially two products. A dose of "quaint" and tons of secrecy. Well, not so much with the secrecy, it turns out.
A series of scandals going back to 2002 and involving the theft by former bank employees of customer data from almost every major bank in the country, and blackmail in the form of threats to disclose that data to various governmental authorities, has not only shattered the image of secrecy Liechtenstein formerly enjoyed, but now attracted the attention of no less than 4 national governments currently in the midst of serious tax evasion investigations, including the United States.
At one point Germany was paying what can only really be called "spies" to obtain tax data on its citizens by hook or by crook. (Bribery, sex, the usual inducements all played a role). You might well guess how long it took the horrified Swiss and Liechtenstein authorities to use the word "Gestapo" when describing the tactics which, in defense of the havens, do quite resemble certain efforts in the mid-1930s that caused the creation of modern bank secrecy laws in the first place.
All this highlights a larger debate on taxation and the role of tax havens in international finance, but it also leaves Liechtenstein, its two primary goods now tarnished, in a very difficult position. A full quarter of the country's GDP is in financial services, and another 26% above that is in "general services" at least obliquely connected to the banking business. Even a subtle drain on the primarily German and Austrian assets that Liechtenstein houses could prove dangerous to the country. All that before we even start to consider the kind of regulation that Liechtenstein might, finally, have to submit to.
I'm not quite sure what will become of Liechtenstein. Well, I suppose there is always the winery.