FRANKFURT/BRUSSELS (Reuters) - Offshore haven Liechtenstein has agreed a landmark deal with the US to drop bank secrecy in cases of tax evasion and could make similar concessions in the European Union, a diplomat from the Alpine nation said.

Prince Nikolaus, a member of Liechtenstein's ruling royal family who brokered the deal, told Reuters yesterday the tiny principality had agreed a "significant" change to bank secrecy rules that entitles the US to bank account information when probing a tax dodge.

The prince said he was prepared to grant similar concessions within the European Union but wanted double-taxation agreements as well a commitment by countries to deal leniently with citizens that had hidden money from the taxman in Liechtenstein.

"We accept that more cooperation is necessary because there is more acute pressure," the prince, the brother of Liechtenstein's ruling monarch and the country's ambassador to Brussels, told Reuters by phone from Brussels.

"People understand better today than a year ago that this is a hot issue," said the prince. "It is of high political importance to many countries. Money is a rare species for states — they need every penny."

Liechtestein is together with Monaco and Andorra one of three countries blacklisted by the Organisation for Economic Cooperation and Development and was the target of a German investigation into thousands of citizens suspected of parking untaxed income in the principality.

The deal brokered with Washington, due to be signed this month, means banks in Liechtenstein could be forced to hand over bank account information to the US authorities should they suspect tax evasion.

Previously, the US had to prove a deliberate tax fraud — a standard so high it made bank accounts in the small country impenetrable to outsiders.

The Swiss banking association denied that the deal could pressure neighbouring Switzerland — the world's biggest offshore centre — to take a similar step as it has a long-standing taxation agreement with the United States.

"We are in a different position and we are not under any pressure now and we have not heard any demands from the US government with regards to renegotiating that agreement," a spokesman said.

Wedged between Austria and Switzerland, Liechtenstein is not an EU member and is under pressure from nearby EU countries to disclose bank data of non-residents.

An EU official confirmed that talks with Liechtenstein were in an advanced stage.

"The European Commission is in the advanced stages of negotiating an agreement with Liechtenstein on cooperation to fight financial fraud, including direct taxation, but so far there is no concrete deal for EU states and Liechtenstein to sign," the official said.

Germany and France have been pushing for such an agreement to include banking secrecy, which set back the negotiations.

Separately, EU states are also discussing a proposal to widen the scope of the bloc's rules on taxation of non-resident savings' income to include investment foundations used by German investors in Liechtenstein to avoid tax.