There was growing optimism here last night that a process will be opened at today's EU summit to resolve the long and bitter dispute over the directive on taxation of non-resident savings accounts, an attempt to clamp down on massive tax evasion.
Last night the Portuguese presidency presented a new compromise paper to finance ministers which is understood to lean heavily in the direction of British concerns by setting a timeframe for the ending of banking secrecy rather than forcing London to tax the eurobond market.
The ministers were meeting late into the night as leaders began to arrive in the picturesque city of Porto for the two-day summit which starts this morning a few miles away in Feira. It is likely to be dominated by the tax issue and the question of Austria's pariah status.
A British Treasury spokesman expressed delight that the savings directive argument was being fought on their ground, a reality confirmed by a senior Commission source who said, however, that it was still not clear whether Luxembourg and Austria could swallow the new package here or would require more time.
At stake is the three-year-old proposal from the Commission to clamp down on evasion of tax by offering member-states the option either of imposing a minimum tax on savings accounts or to report them to the non-resident's tax authorities.
This formula, known as the "coexistence model", agreed in principle two years ago, has come to grief because of a British insistence that a minimum tax will threaten their eurobond market and their refusal to contemplate providing account information to countries which do not provide it in return.
Now the focus is on setting a binding deadline for the ending of banking secrecy, probably in exchange for a British willingness to supply information. Agreement today on an outline formula would represent a significant step forward in an argument that has severely stretched the credibility of the Union.
Diplomats say, however, that progress on the Austrian issue is unlikely, with only a minority of countries yet believing that the time has come to let Vienna off the hook. The best they can hope for is a general statement which would "open the door" to a review of the bilateral sanctions at a later date.
Meanwhile, Mr Jorg Haider, the former leader of the Freedom Party, has produced a pamphlet for distribution to leaders at the summit on minority ethnic rights in his province of Carinthia in a bid to demonstrate how well his local administration treats minorities.
In the town of Feira today some 35,000 workers are expected to rally against unemployment. Portuguese, Spanish and French contingents are expected to join the march organised by the European Trade Union Congress as well as groups from the accession countries of eastern Europe.
