Swiss digest reputational damage

Merz had lots of questions to answer Keystone

World renowned as a country of peace, neutrality and conflict resolution, Switzerland has had to face up to another year of damaging international headlines.

This content was published on December 26, 2009 - 18:36

Over the last 12 months Switzerland has been hit with a humiliating climbdown over tax evasion, banking giant UBS being dragged through the mud, an intensifying dispute with Libya and criticism over a vote to ban minarets.

At one stage in the year, it seemed that Switzerland was besieged by hostile opinion from all over the globe. But after a period of furious back-pedaling and being pushed around, the Swiss appear to have finally drawn a line in the sand.

The year 2009 was never going to be an easy one for any country mired in the full throes of a financial crisis that was turning into a global economic downturn.

But the Swiss financial sector was thrown into further chaos when UBS held up its hands in February to helping United States citizens evade their taxes. After paying an initial $780 million (SFr819 million) fine, UBS was then ordered to violate the sanctity of Swiss banking secrecy by handing over the names of thousands of clients to the US authorities.

At the same time, the Swiss government was conducting a firefighting mission against the Organisation for Economic Development and Cooperation (OECD) and a number of European countries that were also complaining about Swiss involvement in tax fraud.

Libyan crisis

Embattled Finance Minister (and president in 2009) Hans-Rudolf Merz had barely agreed to bow to many of these demands before he was confronted with two Swiss businessmen being held hostage in Libya.

Merz was forced to publicly apologise for the arrest in Geneva in 2008 of a son of Libyan leader Moammar Gaddafi – an act that sparked the retaliatory measure. The fact that the apology did not secure the release of the Swiss men (they are still in Libya) was interpreted by the Swiss press as weakness and placed Merz under enormous pressure.

Switzerland was again attracting negative comments after arresting film director Roman Polanski over a long-standing arrest warrant issued by the US. Polanski had been allowed to roam Europe with impunity until Switzerland intervened on behalf of the US.

The fact that Switzerland has a bilateral extradition treaty with the US did not stop eyebrows being raised, particularly in France, where Polanski holds dual citizenship. Polanski is still under house arrest in Switzerland while extradition proceedings continue.

But the muffled outcry was nothing compared to the open condemnation of a Swiss referendum vote in November to ban the future construction of minarets. International newspapers called the vote “intolerant”, “absurd” and even “racist” while the Arabic press was even more virulent with its headlines.

Heidi is fictional

However, Martin Hofer, an executive of the Swiss branch of international public relations company Burson Marsteller, urged people to ditch their romantic Heidi image of Switzerland and get real.

“A lot of admiration for Switzerland’s clean-cut image has been lost this year. People simply do not understand Switzerland anymore because the pretty picture they had in their minds has been lost. However, it was unrealistic to have such stereotypical images of mountains, nice scenery and economic efficiency in the first place,” he told

“The outside world needs to look inside the wrapping and learn how Switzerland works and, particularly, how direct democracy functions here. Only then will they properly be able to understand the country and its people.”

Switzerland has also proved this year that, far from being a helpless bystander on the international stage, it does also possess some teeth.

A renegotiated double taxation agreement with Italy, due to be ratified by parliament, was put on ice after Italy’s aggressive tax amnesty irritated Switzerland. The same then happened with France after the French authorities took possession of stolen client data from a Swiss bank.

Go alone mentality

Switzerland recently released a strategy paper on the tax evasion issue, saying it would not agree to the automatic exchange of bank client information with other countries. This was seen as a statement that Switzerland had gone far enough.

In addition, the international attacks appear to have stiffened resolve among the general populace about their right to express their will through referenda, even if the results offend foreign sensibilities – and sometimes their own.

A poll conducted by Zurich University in December showed that three quarters of Swiss still strongly support the principles of banking secrecy.

But Martin Hofer had one word of warning about the possible effects of Switzerland’s staunch defence of its sovereignty against foreign influence.

“Perhaps Switzerland needs to redefine its place in the worldwide community. If other countries are not with us when we need them, then perhaps this is a consequence of Switzerland wanting to go it alone,” he said.

Matthew Allen,

The events that shaped Switzerland’s image in 2009

In February, UBS bank admitted helping US clients to evade taxes and was fined $780 million. The US tax authorities then demanded the names of thousands of UBS clients.

In April, Switzerland was placed on an OECD “grey list” of uncooperative tax havens along with more than 30 other states. Switzerland agreed to amend taxation agreements with other countries and was taken off the list in September.

In July, Libya detained two Swiss businessmen for “visa violations”. In August, Merz delivered a Swiss apology to Libya for the arrest in 2008 of Hannibal Gaddafi in Geneva, but the climbdown still has not secured the release of the hostages.

Also in August, Switzerland agreed to hand over the names of 4,450 UBS clients to the US authorities to avoid the bank being taken to court. The deal was viewed as a major compromise of Swiss banking secrecy laws.

In September, movie maker Roman Polanski was arrested as he visited the Zurich Film Festival. He is still under house arrest as Switzerland processes a US extradition request.

In November, Swiss voters decided to ban the future construction of minarets during a referendum. The poll decision may still face challenges in Swiss and European courts on the grounds that it violates human rights.

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