Last week, a UBS client won a Swiss court appeal to prevent her account data from being given to the U.S. authorities, throwing doubt on Switzerland's ability to deliver details of 4,450 UBS client accounts to the United States as agreed in August.
The decision by the Federal Administrative Court has destroyed this compromise and got Switzerland -- not only UBS -- in a enormously difficult position, Swiss daily Tagesanzeiger quoted Villiger as saying.
The UBS chairman and former Swiss finance minister rejected a suggestion by some Swiss politicians that UBS should now find its own way out of the tax row with the U.S.
The Swiss government has to decide on the next steps, Villiger was quoted as saying. Without an intergovernmental agreement there will be no solution, he said.
Some politicians have suggested the bank should break Swiss banking secrecy laws and hand over client data without the government's backing.
But Villiger dismissed this. (UBS chief executive) Oswald Gruebel and I will never hand over data illegally, he said.
Switzerland's cabinet meets on Wednesday to discuss how to prevent a possible collapse of the tax deal with the United States.
Analysts and lawyers are unsure about which of a number of options the Swiss government will choose. These include the use of an emergency law that allows for the lifting of Swiss bank secrecy in special cases, a renegotiation of the deal, retroactive approval of the treaty from parliament or the early introduction of a new double taxation agreement with the United States.
(Reporting by Sven Egenter; Editing by Erica Billingham)