Merkel challenger sees opportunity in tax haven uproar

BERLIN (Reuters) - German Chancellor Angela Merkel's main challenger in a September election accused her government on Monday of failing in the battle against tax evasion by seeking cosy deals with havens like Switzerland when it should be raising pressure on them.

With his Social Democrats (SPD) far behind Merkel's conservatives less than half a year before the German vote, Peer Steinbrueck may be hoping to reduce the gap by focusing on one of his signature policy issues.

As finance minister in Merkel's first-term "grand coalition", Steinbrueck led a high-profile campaign to root out tax evasion, famously describing the Swiss at the height of his crackdown as Indians running scared from the cavalry.

An EU bailout of Cyprus, the recent leak of thousands of holders of secret bank accounts and the belated admission last week by former French budget minister Jerome Cahuzac that he held a foreign account has thrust the issue of tax havens back onto the policy agenda in Europe.

"Merkel's government still doesn't seem to understand that the battle against tax evasion is closely linked to the stabilisation of the euro zone," Steinbrueck said in Berlin.

"Time has been wasted. Merkel's government is responsible for this and for the hectic activism that has suddenly broken out now."

The German government rejected the suggestion it had gone soft on tax evaders, saying it had been pursuing the issue for years and that it would be on the agenda of upcoming meetings of the International Monetary Fund (IMF) and Group of 20 (G20).

"It is all a persistent, coherent plan we have been working on for many years and which is gradually bearing fruit," finance ministry spokesman Martin Kotthaus said.

But in a sign the issue could come back to haunt the government, a cartoon in German daily Tagesspiegel showed Finance Minister Wolfgang Schaeuble asleep and snoring in his wheelchair through 2009, 2010, 2011 and 2012, only to wake up in 2013 and declare: "We need to fight this tax evasion problem once and for all!"

8-POINT PLAN

At a news conference on Monday, Steinbrueck presented an eight-point plan for combating tax evasion that included stronger monitoring of the OECD's tax haven "black list", tougher punishment for banks that offer services that help in tax evasion and the creation of a federal body to pursue tax evaders in Germany.

His party helped block an attempt by Merkel's government last year to sign a bilateral deal with Switzerland that would have imposed taxes on assets stashed by German citizens. The SPD said the deal would have let off tax evaders too easily.

Meanwhile, signs emerged over the weekend that the public debate could force new concessions from European countries that continue to defend secrecy in their banking systems.

Luxembourg's Finance Minister Luc Frieden told a German newspaper on Sunday that his country was dropping its opposition to the automatic exchange of bank depositor information within the European Union.

However Finance Minister Maria Fekter of Austria, the other EU country that refuses to share this information, vowed to fight "like a lion" to defend bank secrecy at home, drawing a rebuke from the European Commission.

"The spotlight is now on Austria. If it continues to resist this inevitable progress towards greater transparency, it will find itself in a lonely and quite unsustainable position," Algirdas Semeta, the European commissioner in charge of tax policy said in a statement to Reuters.

(Additional reporting by Holger Hansen and Stephen Brown, Editing by Gareth Jones)

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