Following Italy’s raid on Swiss banks located in Italy, the Swiss government announced on November 1st that it has suspended its negotiations regarding their DTA with Italy. In retaliation, Giulio Tremonti, Italy’s Finance Minister, threatened to “dry out” Lugano, Switzerland’s most prominent financial center after Zurich and Geneva.

Hans-Rudolf Merz, Swiss President and Finance Minister, said “The accord was ready for ratification from our side. But now the negotiations are being suspended until further notice”. Though no direct confirmation has been given, negotiations are not expected to be reinstated until the commencement of Italy’s current tax amnesty.

Further, Hans-Rudolf Merz, described Italy’s actions regarding the bank raids as “criminalizing” the Swiss legal system. He went on to say “We do not accept being spied on by foreigners. We have show Rome that this is not acceptable,” and that negotiation of the Double Taxation Agreement is impossible under such circumstances.

In an effort to quell any further escalation in the situation, the Swiss government instated a working group on November 4th. Describing the purpose of the group, the Swiss finance ministry stated “The working group has the mandate to form a common strategy to calm tax and political relations with Italy and evaluate measures”.