The mutual suspicions between Germany and Switzerland over the former's tax evaders have been exacerbated by new revelations about Swiss spying on German tax authorities.

The "Süddeutsche Zeitung" daily, along with public broadcasters NDR and WDR, reported on Thursday that Swiss intelligence agency NDB planted an as-yet-unidentified spy in the financial administration of Germany's most populous state, North Rhine-Westphalia (NRW).

The information emerged during an investigation into Daniel M., a Swiss intelligence professional and former police officer who was arrested in Frankfurt last Friday on spying charges.

NRW has been particularly ruthless about buying CDs of stolen Swiss bank data to track down German tax evaders in the last few years, causing tension between the two countries and triggering a counter-operation by the NDB to find informants stealing Swiss bank secrets.

Stopping the leaks

According to the "Süddeutsche Zeitung," the unknown spy's job was to find "direct information" about how German tax authorities go about buying CDs of data from Swiss sources. Since around 2010, German states have spent several million euros buying a series of stolen CDs containing details of bank accounts of major banks including UBS and Credit Suisse. The states say the strategy enables them to recoup millions more in illegally evaded tax revenue.

NRW Finance Minister Norbert Walter-Borjans expressed outrage at the new reports of Swiss intervention, saying they had given the affair "a new dimension." He also called for cooperation, rather than mutual distrust, between the two governments.

"If Switzerland is serious about turning away from the dubious business transactions of its financial institutions, then these stories have to stop," he told the "Kölner Stadt-Anzeiger" newspaper. "We have to quickly arrive at some constructive cooperation against tax fraud, or else the highly questionable financial jugglers will end up having the last laugh."

But intelligence experts did not raise their eyebrows much at the latest reports. "For intelligence agency laymen, like the North Rhine-Westphalian minister who cried 'scandal! scandal!,' it might be a scandal, but for agents themselves it's business as usual," said Erich Schmidt-Eenboom, author of several books on European secret services.

Schmidt-Eenboom explained that the German and Swiss intelligence agencies usually work relatively well together - except where their countries' interests are opposed. "And this is particularly notable in this case, because the Swiss of course have a great interest in maintaining banking secrecy, and the German government has a great interest in uncovering tax evaders," he told DW.

International law allows foreign spying, but, as Schmidt-Eenboom said, "a spy on German soil is violating German law - he can be charged and can be threatened with up to five years in jail."

An international spy thriller

The details of the affair currently circulating in the German press would not be out of place in a John le Carre novel. According to "Die Welt" newspaper, which originally broke the story of Daniel M.'s arrest, the 54-year-old former Zurich police detective and sometime private investigator for a Florida security firm was engaged by the NDB in 2012.

He was trained at a secret location and furnished with a mobile phone and a list of NRW tax investigators to spy on. The NDB's highest echelons were said to be apprised of the operation.

M. also had a source inside the NRW tax office, whose identity German investigators apparently don't know, and together the pair were able to complete a list of officials involved with buying stolen bank data, the "Süddeutsche Zeitung" said.

Meanwhile, Swiss news outlet SRF reported that M. had been tracking down German investigators working illegally in Switzerland. More intriguingly, M. is also himself under investigation in Switzerland for selling bank accounts data to Germany - though his lawyer Valentin Landmann said that this data was forged.

This, according to Schmidt-Eenboom, suggests the NDB had been using M. as bait for the German tax authorities to help him gain access to their procedures. Allowing a dead-end investigation to continue in Switzerland gave M. more credibility as a potential informant, he speculated.

"That made him an ideal agent for this job. As a private security consultant, he worked for several companies, including major Swiss banks," he said. "Even then, he was working on the side for the NDB. He was a good choice - he had intelligence experience as a police officer, and he could credibly pass himself off as a worker for a major Swiss bank - with something to offer."