The Grand Duchy would “no longer strictly reject” the automatic exchange of information between EU countries, Luxembourg’s finance minister Luc Frieden has said. “We want to enhance cooperation with foreign tax authorities,” Frieden told the Frankfurter Allgemeine Sonntagszeitung, one of Germany’s largest national newspapers.

Currently only Austria and Luxembourg do not participate in the EU tax cooperation scheme, which began in 2003.

These days, however, Luxembourg is not looking for clients who are only seeking bank secrecy or “who want to save on taxes”, the minister said in the interview, which was published on Sunday. “Today they appreciate the good advice, international asset management products, and the sound policy environment” found in the country.

The finance minister also rejected the accusation that, like Cyprus, the Grand Duchy’s financial institutions are dangerously oversized. “This concern does not exist,” the FAS quoted Frieden as saying. “Our financial sector is set up quite differently than in Cyprus. It is not dominated by two major domestic banks, but many small banks and investment companies, which are almost all subsidiaries of foreign institutions. A quarter of the banks, for example, have a German mother. The largest employer in Luxembourg is a French bank.”

Luxembourg’s finance minister said the so-called “bail-in” of Cypriot savers--who lost part of their savings above €100,000--was not a model for future bank bailouts. Bail-ins increase “the uncertainty of the savers. And trust is important; otherwise they withdraw their money from European banks. I think the bailout of the banks by the shareholders and taxpayers, as in Spain or Ireland, is the better way because it provides more stability.”

Economic diversification

While touting the Grand Duchy’s non-financial sector, such as steelmaker ArcelorMittal, media group RTL, satellite operator SES, and the development of the biotechnology and logistics spaces, in the FAS interview Frieden conceded that “nevertheless, in the future, our financial sector will account for about a third of the annual economic output of Luxembourg.”