It was High Noon in the Berlin Chancellery yesterday as the leader of Liechtenstein (population 35,000) faced down an irritated Chancellor of Germany (population 82 million), but in the end guns stayed in holsters and an uneasy calm returned to the badlands of Central Europe.

The cause of the row is Berlin’s decision to allow its Secret Service to pay a thief more than €4 million (£3 million) for data on wealthy and allegedly tax-dodging Germans. The information was apparently stolen and copied by a disgruntled Liechtenstein bank employee.

“Germany is acting as a fence in grand style, a receiver of stolen goods,“ Crown Prince Alois of Liechtenstein said before the Berlin talks between Angela Merkel and his Prime Minister, Otmar Hasler. “Not helpful for our relationship,” Ms Merkel hit back yesterday.

The headline in the Berlin daily Taz said it all: “Liechtenstein attacks Germany!” The dwarf state, 25km (15 miles) long and 12km wide, has a history of standing up to the Germans. It refused to sign a peace treaty with Prussia after the Austro-Prussian war and technically stayed in a state of war with the Germans well into the 1930s. During the Second World War it remained neutral and matters have calmed down since. Liechtensteiners are, however, still highly sensitive about Germany dictating terms to the mountain principality.

So Mr Hasler listened, quietly simmering, as the German Chancellor set out what she expected from Liechtenstein. “The signing of an OECD protocol on criminal tax-evasion cases,” she listed, “constructive cooperation to stop damaging competition on tax rates and the im-plementation of EU money-launder-ing and fraud directives.”

Raids continued throughout Germany yesterday targeting wealthy Liechtenstein banking clients. Last week German prosecutors detained Klaus Zumwinkel, the head of the postal group Deutsche Post. Police moved against Karl Michael Betzl, the data protection watchdog for the state of Bavaria, yesterday.

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