VIENNA (Reuters) - Austria will join Luxembourg for talks with the European Union on how to crack down on cross-border tax cheats, Chancellor Werner Faymann said on Tuesday, signaling an easing of its hardline stance on bank secrecy.
But the Social Democrat's conservative coalition partners cited legal obstacles to sharing for the first time personal information on bank depositors, a touchy subject ahead of elections due by late September.
The European Commission warned Austria on Monday that its banking secrecy regime would leave it in a "lonely and unsustainable position" if it did not follow the same rules as other countries in sharing information on foreign depositors.
"We will hold negotiations together with Luxembourg," Faymann told reporters after a cabinet meeting.
Asked if that meant Austria was giving up its decades-long resistance to sharing the identities of savers, he said: "We are conducting these talks together with Luxembourg so that something comes out of it. That is what it means."
He said the issue was how to address accounts held by foreigners rather than by Austrians.
Conservative Finance Minister Maria Fekter stressed that Austrian law does not let the country share personal information about bank depositors with other states.
"In our constitution, privacy and data protection get very high priority. That really does not fit with an automatic exchange" of depositor data, she told reporters.
Deputy Chancellor Michael Spindelegger, leader of the conservative People's Party, also took a more cautious line, saying Austria was always ready to go after criminals trying to abuse the banking system but would not expose all bank accounts.
"We want full enlightenment but this ... does not mean all savings in Austria will automatically be addressable by foreign authorities," he said.
"We will enter negotiations and see that we achieve just what we want in these negotiations."
As part of a drive to curb tax evasion, Germany has been pressing all "offshore" banking centers in Europe to apply uniform rules on exchanging account holders' information. Particular attention has been paid to Luxembourg and Austria, the only EU states holding out.
Last month's bailout of Cyprus, where the banking system was swollen by foreigners drawn by low taxes and easy regulation, has served to focus attention on such jurisdictions.
In a sign that the German-led pressure is having an impact, Luxembourg finance minister Luc Frieden said on Tuesday it was considering ending its bank secrecy rules, automatically handing over details of bank account holders to other EU countries.
"It has not been decided, it is something that is being discussed in the government," Frieden told Reuters.
(Reporting by Michael Shields; Editing by Catherine Evans)