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“An average German has to work until July every year before he can earn anything for himself,” Joseph Hutz, a teacher, says. “The taxman takes everything else. What kind of life is that?”

Mario Frick, a former Prime Minister of Liechtenstein, agrees. “Germany is the only country which has a completely transparent bank customer,” Mr Frick, who runs a legal practice specialising in banking law, says. “If that becomes the model for the whole of Europe, then money will simply drift away – to SouthEast Asia or Central America.”

Across the border in Switzerland, Roger Köppel, editor of the influential Weltwoche and a canny conservative observer of Germany, is even tougher on Berlin. “The rich no longer have a lobby in Germany,” he says. “The East German state wanted to wall in its citizens – modern Germany is seeking salvation by spreading its Big Brother state across its geographical frontiers.”

Seen from the Liechtenstein point a service to Germans held captive by an overbearing state. “At the heart of this dispute is a radically different view of the relationship between the State and the individual,” Dr Manz-Christ says. “We believe that the State has no business looking through private accounts unless there is concrete suspicion of active criminal intent. Tax evasion is not the same as tax fraud.”

For ordinary Liechtensteiners there is only one culprit: Heinrich Kieber, the 42-year-old whistle-blower, who is now said to be living under a false identity, perhaps in Australia.

The most upsetting revelation for people in Vaduz yesterday was that Kieber had once tried to blackmail Prince Hans-Adam. According to the LGT bank, he had sent a large envelope to the prince containing tape-recorded threats and demanding help with his legal problem. Kieber was jailed for four years in October 2003. He then appealed again to the prince, this time for a pardon. The sentenced was reduced.

The German use of Kieber’s material is seen by Liechtenstein as an affront to the monarchy. Certainly, Hans-Adam’s Sandhurst-education son, Alois, reacted furiously when the Germans first showed their cards. “We are under bombardment from a great power,” he said.

The Liechtenstein Royal Family is personally, intimately involved in the whole system of financial foundations. The LGT bank, which has 77,000 customers and turned in more than €100 million in profit, is part of the LGT group owned by the Royal Family.

Its advertising slogan is even “Invest like the Prince”. The most important posts are occupied by members of the family: president of the foundation council is Prince Philipp, the younger brother of Hans-Adam. Chief executive is Prince Max, the youngest son of Hans-Adam and brother of Alois.

Prince Hans-Adam has his own vineyards, a restaurant in Vaduz and sometimes he can be seen going into the high street pizzeria, Potenza. On the whole, his contact with his citizens is confined to National Day on August 15, when about 7,000 Liechtensteiners gather in the meadow around his castle and toast the health of the 63-year-old monarch.

The days have long since passed when the Royal Family had to sell a portrait by Frans Hals to maintain the cash flow of the Liechtenstein budget.

But if the tax havens are squeezed out of business, there could soon be some more royal rummage sales.

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