Merz launched a staunch defence of banking secrecy in a speech to the centre-right Radical Party (FDP).

"We will not to abandon banking secrecy," Merz said.

"The automatic exchange of information has to be rejected," he added, referring to a key demand of European critics who say that secrecy encourages tax evasion.

But Merz accepted that some items might be a matter for discussion, according to remarks reported by the Swiss news agency ATS-SDA.

"Maybe we will have to make concessions in one case or another," he said, without elaborating.

The finance minister said that to avoid the risk of sanctions against Swiss banks, Switzerland should have something to offer in dialogue on the matter at the Organisation for Economic Cooperation and Development (OECD).

In recent months, Switzerland has faced growing international criticism especially in the United States and in the European Union.

British and German ministers have claimed secrecy encourages EU citizens to evade taxes by hiding their money in Swiss banks.

German Finance Minister Peer Steinbrueck suggested last October that Switzerland should be placed on the OECD's list of uncooperative havens.

The pressure was stepped up dramatically this month after the country's biggest bank, UBS, provided data on up to 300 clients to the US government and paid 780 million dollars to settle charges of aiding tax fraud.

A day later, the US Justice Department filed a lawsuit to try to force UBS to disclose the identities of 52,000 US customers who allegedly evaded taxes, sparking a debate in Switzerland about the "end" of banking secrecy.

Banking secrecy law prohibits Swiss banks from revealing information to domestic or foreign authorities or any third parties about their clients, except in cases involving recognized criminal investigations.

In Switzerland, only tax fraud is regarded as a crime, not tax evasion, a distinction that does not exist in most other major economies.

A leading Swiss private banker, Ivan Pictet, warned in a newspaper interview this week that Switzerland's financial services industry, a pillar of the economy, "would shrink by up to half of its size" without banking secrecy.

Copyright AFP 2008, AFP stories and photos shall not be published, broadcast, rewritten for broadcast or publication or redistributed directly or indirectly in any medium