After Cyprus buckled under the weight of its massive bad debt and pundits started casting around for the next domino to fall, so many eyes turned to Luxembourg that the tiny landlocked state felt compelled to issue a terse statement rebuffing the comparisons.
Despite few obvious parallels between the broke Mediterranean island and the wealthiest nation in the eurozone, they did have one crucial factor in common: a banking sector bloated by money from overseas investors attracted by low taxes, high interest rates and relatively few questions asked.
Across Europe, a handful of mostly small nations have built up offshore banking sectors which propelled citizens to prosperity on the back of money made elsewhere.
But as a backlash mounts after the Cyprus crisis, a political scandal in France, and the naming and shaming of dozens of global tax evaders, Europe seems to have finally lost patience with those seeking to squirrel their money away from the taxman, and the nations which court them.
The Prime Minister of Luxembourg – one of two countries which had been blocking a European Union-wide automatic data-sharing scheme – said on Wednesday that it would from 2015 start swapping personal bank account details of EU citizens, lifting the veil of secrecy that activists say attracted not only legitimate businesses but money launderers and criminals.
Intense pressure is now on Austria to also embrace the EU Savings Directive, which aims to detect and clamp down on tax evasion. It remains the only EU nation which has refused to swap data on its bank account holders, leaving it in a "lonely and unsustainable position", one EU official said.
Austria's Finance Minister said that the country was considering more transparent measures.
Switzerland has already signed agreements with Germany and the US to share banking information, and the Netherlands is expected later this year to clamp down on corporations using tax loopholes to set up subsidiaries and pay minimal tax.
To qualify for a €10bn (£8.5bn) bailout, Cyprus will have to increase its corporate tax rate and wind down the offshore sector, removing yet another convenient location for dumping funds out of the taxman's reach.
"Across Europe there's a recognition that tax evasion has depleted revenues, in some cases to a catastrophic level," said John Christensen, the director of the pressure group Tax Justice Network.
Luxembourg is the largest tax haven in the EU, with an estimated €2.1trn in its banks. That makes its banking sector 22 times the size of the tiny nation's economy. Cyprus, by contrast, had a banking sector about seven times its GDP, roughly the same ratio as Malta.
For Luxembourg's approximately 500,000 citizens, the model has brought the highest per capita income in the EU. The Grand Duchy has insisted that questions about the sustainability of the model do not apply to it, claiming that the country's banking sector is secure.
But it is not just the sustainability of offshore banking which is stirring action in many countries. Tax dodging runs the gamut from downright illegal evasion, the morally grey area of avoidance, to the positively encouraged "optimisation". Consequently, for many it is not a question of whether it is legal or sustainable, but whether it is fair, especially as taxes for the ordinary European citizens soar as part of punishing austerity drives.
It was moral outrage that spurred action in France this week, after the Budget Minister, Jerome Cahuzac, was forced out of office for parking €600,000 in a Swiss bank account. Seeking to claw back credibility after the politically damaging scandal, President François Hollande (pictured below) declared war on the world's tax havens and ordered French banks to reveal all their subsidiaries.
Nicolas Véron, a senior fellow at the Brussels-based Bruegel think-tank, said the ongoing financial crisis in Europe was stoking public anger, and he expected more action at the national level to bring officials to heel.
"I think we'll see more of that sort of thing, and that will make it marginally more difficult for public officials to squirrel away financial wealth in offshore centres," he said.
Mr Hollande's broader crusade to "eradicate" tax havens, however, will be harder to implement. While the EU can demand greater transparency, setting taxes remains the domain of individual member states.
The EU Savings Directive also applies only to individuals. Multinationals parking profits in a country where there is merely one employee or a letter-box and thus paying tax there remains entirely legal and as yet not open to the same public scrutiny. And if Europe tightens the screws without the rest of the world falling in line, there are other countries further afield ready to welcome the cash. "Major players – Mauritius, Singapore, Hong Kong, the Cayman Islands – are poised to pick up the slack," said Mr Christensen.Reuse content