Fury in Liechtenstein over German tax inquiry

Germany's attempts to track down an estimated 1,000 "prominent" suspects behind the country's biggest tax evasion scandal on record has sparked a furious row between the Chancellor Angela Merkel's government and the Alpine financial haven Liechtenstein.

Crown Prince Alois, the acting head of Liechtenstein, accused Germany of launching an "attack" on his country and of using its intelligence services illegally to bribe a dubious informant into turning in suspected tax evaders.

The Prince's outburst came less than 24 hours before Otmar Hasler, Liechtenstein's Prime Minister, and Ms Merkel were due to discuss the deepening row over secret bank accounts allegedly held in Liechtenstein by hundreds of "prominent" Germans who are suspected of evading €4bn (£3bn) worth of tax.

On Monday state prosecutors, tax officials and police raided more than 100 homes and offices throughout Germany in search of tax evaders with secret Liechtenstein accounts.

The hunt followed an admission by Germany's federal intelligence service, the Bundesnachrichtendienst (BND) that its agents had paid out €4m to a former Liechtenstein bank employee turned "supergrass" for a CD containing detailed information about Germans with accounts at Liechtenstein's LGT bank. Their actions were said to have been sanctioned by the government.

Prince Alois described the BND's behaviour as "highly suspect" yesterday. He insisted that the informant had been convicted of stealing bank data in 2002 and imprisoned. "Obviously Germany wants to be a big-time receiver of stolen goods," he said.

The Wall Street Journal reported yesterday that the informant was a 50-year-old former LGT employee who had a record of attempting to sell bank data.

German newspaper reports said the BND made it a regular practice to offer cash for secret bank data. A spokesman for Germany's Finance Ministry said: "This is not an attack on Liechtenstein. It is an attack on German criminals."

But two German lawyers said they would prosecute the government and the BND over their handling of the affair. Ferdinand von Schirach, one of the lawyers, accused the BND of playing the role of agent provocateur because it had solicited information with a cash reward financed by the taxpayer. "Taxpayers' money should not be used to pay for a crime," he said.