German Anger Meets Swiss Wrath in Tax Row
By - October 23, 2008

The Swiss government has reacted angrily to a stinging attack on its banking secrecy laws by the German and French finance ministers. Following its neighbours' joint call for Switzerland to be added to a tax haven blacklist, the government has asked the foreign ministry to summon Germany's ambassador to Bern to express its "surprise and discontent". "One does not treat a partner country in such a way," Swiss Foreign Minister Micheline Calmy-Rey said. – Swissinfo

Dominant Social Theme: Infighting is to be expected.

Free-Market Analysis: Actually, this is not merely "infighting" but yet another historical opportunity to watch the conflict between socialism and republicanism. For Switzerland is probably as close to a functional republic as the Western world has now that America has dropped out of the picture.

But Switzerland is under attack. Or rather, the way of governing that belongs to Switzerland is under attack. No doubt about it. How have the Swiss reacted? Well, let's see. They surrendered the gold link to the Swiss franc, and generally have retained a respectful and even accommodative approach to both the EU and America in the face of wide-ranging provocations.

What is the sin of the Swiss? That private citizens ought to have the right to privacy? That's a pretty basic and unobjectionable point of view. If a citizen from another country comes to Switzerland and seeks privacy, he or she should have it. The Swiss point of view is that it is not their business to interfere with the relationship between the citizen and his or her country. But if the country seeks information about that citizen, the Swiss see no reason to offer it as the relationship is with the individual not the individual's country.

This is the crux, the heart, of what is currently driving EU bureaucrats mad. For in the world of the EU, the citizen truly has no rights except what the state wishes to give him. The signs of the powerless relationship that the citizen has with the state in the EU are everywhere. The EU constitution itself, a profoundly vile document took the position that an individual's rights came from the state. This is doubtless why the EU leaders have no compunction in trying to reverse key votes of nation states. In their world, voting is mostly a public relations exercise to be directed and even held again if the results are not "right." And by right, the EU leadership means that the vote yields ever more powerful centralization.

The EU is set on a certain course. Its basically unaccountable socialist leadership won't be satisfied until the EU has a standing army, a strong constitution, endless taxing authority, a flag, an anthem, a single central bank and monetary policy, a single judiciary, etc. Actually, it has some of this already, but it wants more, much more. It wants everything that its individual states have, and its leaders seem to want to be unaccountable as well. The EU leaders, perhaps, are under the impression they are recreating the Empire of Charlemagne. Why they would want to do this is unclear. Why Switzerland would want to participate is even more unclear.

The Swiss love their country, which is surrounded by steep mountains. The Swiss grow their own food, field their own army, even vote with their hands in outdoor marketplaces in some cantons. Why the Swiss seem to believe that they can somehow palliate the EU leadership by giving up a snippet of freedom here and by making a regulatory compromise there, is not quite clear. The Swiss have been making compromises with the EU for the last decade, and it has brought them to this – a declaration by Germany that they are an outlaw state.

One can see the Swiss are trying hard. But eventually, one thinks, the German Swiss may have to tell the French Swiss "no more." They have tried it the way of the French Swiss and it has brought them a more vulnerable franc and banks like UBS that lose US$50 billion at a clip. If the Swiss think that if they "play nice," the EU will simply leave them alone, they are mistaken. That is not how the EU operates. EU leaders are a lot like school bullies. They will continue to advance if they see no opposition. But their position is weak, and their citizens are discontented. There are plenty of things the Swiss can do to fight back.

Here are some ideas. Launch a campaign that speaks to those citizens within the EU who are not happy with the EU's direction – about 75 percent of the population probably. Launch a Voice of America style radio program aimed at Germany and France, the EU's leading states. The French just voted against the EU Constitution. So go over the heads of the EU leaders and appeal directly to the people. Educate them about a free-market. Sponsor trips to Switzerland so EU citizens can see how beautiful a real republic looks, without grimy cities and the urban sprawl of zoning.

Here's another thought. Get the hell out of the IMF and re-link the Swiss franc to gold. Give the German and French leadership something to focus on other than Switzerland as a tax haven. Yes, go the other way. Fight back. Claim the current financial crisis calls for bold measures. For the EU bureaucrats, such bold measures always involve more consolidation and fewer freedoms for everyone else. But Switzerland is a republic. Its people can move in the other direction and carry their leaders along.

Linking the franc back to gold would be deeply upsetting to the EU leadership and the Americans as well. Right now, the Swiss still hold the high ground, at least to a degree. But if they continue to give away pieces of their economic and political system in the hopes that the rest of the Western world will leave them alone, they will eventually be picked to pieces. They will end up like an EU country without ever using the formidable political, financial and military arsenal that have cultivated for a millennia.

Oh, it is a shame to see. With a few well-placed strategic moves, little Switzerland could set the EU back. The argument itself could be turned on its head. For it is the EU, profoundly anti-freedom, that is increasingly the "criminal" state – not Switzerland. Switzerland's leadership, especially those in the German Swiss banking establishment, better take a close look at recent EU/Swiss history. It's not hard to figure out that what the Swiss are doing is not working. Those at the top of the Swiss republican leadership need a more confrontational and truthful approach. One that spells out the benefits of honest money and a functional republican society.

After Thoughts

Re-link the Swiss franc, formally, to gold. Set up a Voice of Switzerland radio station to tell the poor, confused Europeans what is really going on with the expanding criminal element in their leadership. Cultivate exchange programs with the European free-right to build a sympathetic base within the EU. Above all, form a consensus within Switzerland that something needs to be done in an organized and ongoing way. It needn't be done entirely, or even mostly through the government. It can be done by private organizations and with private funds. But it needs to be done.

The Swiss seem constantly on the defensive these days because their leaders can't or won't articulate the virtues of a Swiss republican society. What the Swiss have is worth preserving. It is a model for the rest of the world. Will the epitaph of the Swiss nation simply be that the leaders lacked the will to stand up and tell the truth? The Swiss model is so far superior to the EU model that there is no comparison. But if the Swiss don't make the argument who will? And they better start soon. We'll keep trying… that's for sure.

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