Liechtenstein seeks to avoid link between tax probe and Schengen

Prince Nikolaus von Liechtenstein, the principality's ambassador to the EU, has urged that his country's admission to the Schengen area should not be slowed down by recent tensions over its role as a tax haven.

Germany's Chancellor Angela Merkel warned last week (20 February) that the German parliament might stall its national ratification of the agreement allowing Liechtenstein to join the Schengen zone of border-free travel, if co-operation with German tax authorities did not improve.

Her comments followed a tax probe by Germany which revealed the large-scale involvement of Liechtenstein banks in fraud directed against EU governments. Speaking to European Voice, Prince Nikolaus said that such a move "wouldn't make sense". He stressed that Schengen membership would require the principality to apply "a lot of legislation that the Germans would like to see in place" on co-operation against tax evasion. He also said that negotiations were well advanced on a separate EU-Liechtenstein agreement to combat fraud, which would increase information exchange.

The Schengen agreement with Liechtenstein is to be signed by ministers in Brussels today (28 February). Before it can legally enter into force, it will have to be ratified by all EU member states. The actual lifting of border-checks between the principality and the rest of the bloc can only happen once these steps, as well as a technical evaluation of the country's preparations, are complete.

Liechtenstein's neighbour Switzerland is currently further along the path to Schengen membership. Its agreement to join the bloc is already fully ratified by both sides and expected to enter into force on 1 March. The expectation is that border-checks will be lifted on 26 October, to coincide with the date that airports switch over to winter flight timetables.

If Switzerland was to enter Schengen first it would, in theory, be obliged to put in place border controls with Liechtenstein. This would present significant practical as well as political difficulties as the two countries currently share an area of free movement, as well as an economic and monetary union.

Prince Nikolaus von Liechtenstein, the principality's ambassador to the EU, has urged that his country's admission to the Schengen area should not be slowed down by recent tensions over its role as a tax haven.