Luxembourg has said it will water down its banking secrecy laws after pressure from its EU partners.

It comes amid a Europe-wide effort to crack down on tax evasion as governments across the continent try to balance their books.

Jean-Claude Juncker, the country’s prime minister, told MPs that the time had come for a change.

“If the government changed its position on this issue, it is not under European pressure. Nevertheless, pressure did exist, as 25 of the 27 Member States are in favour of an automatic exchange of information,” he said.

Banking secrecy helped Luxembourg establish itself as a key financial centre.

The industry is about 22 times the size of the country’s economy.

The changes come into effect from January 1, 2015 and will apply only to EU citizens.