Fascinating to watch the battle unfolding between Liechtenstein and the rest of the world involving a world wide tax fraud investigation of its banks covering billions of euros.

Bloomberg reports that Liechtenstein Prime Minister Otmar Hasler remains confident of reaching some sort of deal with the other European states who are calling for greater transparency as they hunt for the hidden billions. But then, he would say that. The crunch issue remains unresolved: the principality has so far resisted calls to lift its banking system's secrecy and help foreign probes into the tax fraud.

Some good insights into what's going down in Liechtenstein from the Daily Mail's Andrew Malone in his piece Europe's dirty little secret: Where dictators, crooks and British tax dodgers hide their billions.

"Apart from visits to the denture factory, organized by the local tourist board, one of the favourite pastimes of Liechtenstein locals is watching for people arriving by bus and carrying bags of cash to the banks. Not that they do this out of envy. With basic tax at 1.8 per cent, and zero unemployment, this is one of the most prosperous countries in the world. Expensive cars purr through the streets. There are, officially, no drug users, tramps or thieves. There are not even any vehicles with dents. More than half the local people work in banks. The average salary is £25,000 per man, woman and child. Indeed, the Principality seems to exist for the sole purpose of making money ... Crooks are something that Liechtenstein knows all about. While claiming that there has been a crackdown on money-laundering recently, the country has also "looked after" the finances of some of the biggest - and most murderous - villains on the planet. saddam hussein banked here. So, too, did Pablo Escobar, the notorious boss of Colombia's Medellin drugs cartel. Slobodan Milosevic, the Serb war criminal, used the Principality's banking services. Russian mafia figures have also been keen to take advantage of the tax benefits. Countless celebrities have also banked here, including Athina Roussel, the granddaughter of the Greek shipping tycoon Aristotle Onassis, who was spotted here just two days after she inherited a small fortune on her 18th birthday. But Liechtenstein, which has no army and a token police force, is fighting back. After one high-ranking official denounced Germany for acting like the "Gestapo" by trampling all over the country's laws, bankers vowed to sue their bigger neighbour for handling stolen goods. Germany countered, saying it would refuse to let Liechtenstein join schemes allowing the free movement of people within Europe's borders. Angela Merkel, the German Chancellor, believes her attack on Liechtenstein will prove popular with Left-wingers, who hate the rich for avoiding tax. Yet Prince Alois, educated at Sandhurst and married to a Bavarian Princess, believes the investigation into more than £5bn held in his banks is virtually a declaration of war, threatening the very existence of the state. "Spying on our clients is unthinkable," the Prince said. "We are going to see what we can do to protect our citizens and also our investors, who trust us, against such methods of investigation. "The principle of confidentiality also applies to our foreign clients. Does a state have the right to obtain information by breaking the law in a friendly state and probably also contravening its own laws?"

From the sound of it, a compromise is a long way off.