SERIOUS, dark-suited and bespectacled, Prince Max of Liechtenstein looks more like a banker than the second-youngest son of one of Europe’s royal families.

That’s because he is one. As well as being the younger brother of Crown Prince Alois, acting head of state, Harvard-educated Prince Max is chief executive of LGT, the Liechtenstein bank owned by the tiny principality’s royal family.

LGT prides itself on its discretion and confidentiality, the same qualities that have made Liechtenstein a favoured tax haven for some of the Continent’s richest individuals. In recent weeks, however, it has found itself in the spotlight.

What began as a public squabble with the German government over records stolen from LGT has snowballed.

Last week, European finance ministers rallied behind Peer Steinbrück, their German colleague, and backed a crackdown on tax havens, claiming that some £77 billion in revenues was being lost by national governments each year.

Liechtenstein was top of the hit list, but there was a clear message that other havens, including Monaco, could also come in for unwelcome scrutiny. Liechtenstein, Monaco and Andorra are classed as “uncooperative tax havens” by the OECD.

“Everybody knows it is a thick board that has to be drilled but the current public debate about tax evasion has speeded things up,” said Steinbrück.

Work should start in more detail next week, when national tax officials are expected in Berlin to discuss how to press tax havens into providing European Union nations with what they want. Tax experts believe a likely first move is a closing of loopholes in the savings directive, the European legislation intended to harmonise taxation between member states.

Several of Britain’s best-known business people, including Sir Stelios Haji-Ioannou, founder of Easyjet, Tina Green, wife of retail magnate Sir Philip Green, and Sir David and Sir Frederick Barclay, the proprietors of the Telegraph Media Group, are among the British business grandees domiciled in Monaco.

Beyond the high-profile names, there are hundreds of hedge-fund managers and entrepreneurs who have chosen the principality because of its zero personal taxation – and enviable lifestyle. Sports stars, including Paula Radcliffe and several Formula One drivers, and film stars such as Sir Roger Moore also make Monaco their home. Many use its proximity to the UK to conduct much of their business in Britain while keeping a Rivi-era home. There is no suggestion that any have used their Monaco connection to dodge tax.

The Brussels-led campaign began after an extraordinary chain of events involving German and British investigators and the use of government money to buy stolen property.

Last month the German tax authorities confirmed they had paid Heinrich Kieber, a former LGT employee, €4.2m (£3.2m) for records he took from the bank in 2002. Prince Max said last week that the files, lifted in 2002, contained the details of some 1,400 clients and £2.7 billion of assets.

The Germans have used the information to mount a tax investigation and already have their first high-profile victim. On Valentine’s Day police arrested Klaus Zumwinkel, chief executive of DHL, the transport and postal group. He is accused of having illegally evaded tax by sequestering money in Liechtenstein. He has resigned from his job and has made no comment about the tax probe.

Two weeks ago, The Sunday Times revealed Britain’s role in the affair. British authorities acquired similar information for £100,000, and are studying details of about 100 accounts held at the Liechtenstein bank.

Germany is not prepared to let the matter rest with individual prosecutions. It has used the Liechtenstein breakthrough to push Brussels into a wider crackdown on tax havens.

In the case of Liechtenstein, it wants a change to a system that gives almost complete secrecy to individuals deposting money. By handing money over to the trustee of a Liechtenstein foundation, individuals can hide their wealth from their national tax authorities. The country, which has some 35,000 residents, has 15 banks and more than 300 trustees, mostly lawyers, who administer thousands of trusts.

Prince Albert of Monaco has reacted with horror to being lumped in with Liechtenstein. When the tax investigation broke, he went to Berlin to meet Chancellor Angela Merkel to plead the principality’s innocence, stressing his country operated a different system entirely.

“The principality of Monaco regrets the comparison made which does not correspond to reality following the criticisms formulated over the last few days with regard to Liechtenstein,” Prince Albert’s office said in a statement.

“Monagasque banking establishments are controlled by the French Banking Commission and the Bank of France. Internal regulations make it impossible to create companies that do not have any real activity, or the financial and human resources necessary for their operation, which excludes any system which is similar to foundations.”

Pressure on Monaco is nothing new. The most serious case came in 2000, when the French government published reports accusing Monaco of being “vulnerable to money-laundering” and of dragging its heels on cross-border cooperation.

Monaco remains on the OECD blacklist because it has refused to sign an agreement on sharing information on individuals’ tax affairs. Gilles Tonelli, the principality’s finance minister, said this was a technicality. He told the newspaper Nice-Matin: “Monaco has refused to sign this commitment because it is not practised by some members of the European Union, nor by other members of the OECD.”

Tax experts in London say that, despite German sabre-rat-tling, the EU’s best hope of persuading Liechtenstein and other havens to play ball lies in diplomacy and political pressure.

“Two or three years ago there were the same secrecy concerns about Jersey, Guernsey and the Isle of Man. Recently, they have come into the fold and are now cooperating with member states,” said John Whiting, senior tax partner at Price Water-house Coopers.

“Europe persuaded Jersey to cooperate because Jersey wanted to be part of Europe. The question is whether Liechtenstein feels the same. They might think they are doing just fine as they are. It’s like the Millwall football chant, ‘No one likes us, we don’t care’”.

Bill Dodwell, head of tax policy at the accountant Deloitte, agrees. “With the Channel Islands and Isle of Man there were obvious levers – they have links and dependencies with the UK and France. But with Liechtenstein, who can put the pressure on?”

If Liechtenstein were to bow to political pressure, it would be old Continental money, rather than corporate clients, that would suffer, experts believe. “In the UK, it is more likely to be people who have put money offshore to evade tax. We are not talking about nondomiciles who are legally structuring their tax affairs,” said Chris Oates, tax partner at Ernst & Young.

Stephen Pallister of the law firm Charles Russell warned the crackdown could have unintend-end consequences.

“If these tax havens come under enormous political pressure we could see a move of funds to places like Mauritius, Singapore and the Caribbean.”

Tax havens may not only have Brussels to contend with. American tax authorities have purchased the stolen Liechtenstein records and three senior legislators, including Democratic presidential contender Barack Obama, are sponsoring legislation aimed at stopping people abusing access to tax havens.

The Stop Tax Haven Abuse Act was introduced last year by Obama, Carl Levin, a senior Democrat senator, and Norm Coleman, a Republican. They said the loss to America from offshore tax evasion “approaches $100 billion a year”.

Prince Max seems to have seen which way the wind is blowing. In a rare press conference last week – to report a record year for the bank, and to give LGT’s version of the stolen records debacle – he offered an olive branch to the Germans. He said the time had come “to sit down constructively with our good neighbours” and said the bad publicity had resulted in the withdrawal of some funds.

He added that the bank had cancelled all advertising, saying: “Our company has been receiving enough attention as it is.”

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