BERLIN, Aug 10: Chancellor Gerhard Schroeder was quoted on Saturday saying he could back an amnesty to attract illegal savings held abroad back to Germany, a move that could hit bank deposits in neighbouring Switzerland and Luxembourg.

I am prepared to talk about an amnesty, if the conditions are right. One can’t talk about punishment, because that would be counterproductive, Schroeder told Der Spiegel magazine in an interview due to be published on Monday.

This money should come back under clearly defined conditions and be available for specific investment projects in east Germany, but not only there, Schroeder said.

But it is also important to signal to legal taxpayers that respect for the law is the norm, Schroeder added.

German Finance Minister Hans Eichel has previously rejected the idea of an amnesty. It would be a slap in the face for honest taxpayers, Eichel told one newspaper last week.

But a move by Italy to repatriate foreign funds has not gone unnoticed in Europe’s largest economy and has been put on the political agenda by the conservative opposition and Peter Hartz, the head of a commission set up by Schroeder to look at ways to stimulate the labour market.

A junior finance minister, Barbara Hendricks, has also said Germany should think about the idea.

Hartz, a top Volkswagen executive, has suggested the government could finance an infrastructure programme, mainly in east Germany, with special “tax amnesty” bonds sold to individuals who have stashed illegal earnings abroad.

In a parliamentary written answer in July 2001 to a question from Otto Solms, a member of parliament for the small liberal opposition Free Democrats Party, the government said that as of June 2000 German individuals and companies held 960 billion euros abroad, excluding direct investments and trade credits.

However, it also said it was impossible to guess how much money flowed abroad illegally after the government in 1992 introduced a 30 per cent tax on interest earned on bank deposits and bonds.

The opposition has signalled that if elected in Germany’s September 22 general election it will overhaul the way the country taxes savings, in line with a request from German banks for the country to adopt a “final withholding tax” system as exists in Austria and other European Union states.—Reuters