* Parliament due to vote on key U.S. tax deal in June

* Rejection of deal could hit entire Swiss economy

* Government has no plan 'B' to save deal if needed

* U.S. mulling new tax cases against banks

By Jason Rhodes

ZURICH, May 20 (Reuters) - A risky game of brinkmanship among
Swiss political parties could sink a key deal to settle a bitter
U.S. tax case against UBS, triggering fresh legal action against
the bank and shaking trust in Switzerland.

The government has said it has no backup plan if parliament
kills an agreement clinched last August obliging Switzerland to
hand 4,450 UBS client accounts to U.S. tax authorities to settle
tax evasion claims against the Swiss bank.

Analysts say that if the deal falls through, it could be
disastrous for UBS and potentially for other Swiss banks,
rocking a financial sector that accounts for 12 percent of the
Alpine nation's economy.

"There is a threat of legal conflict between Switzerland and
the United States in the case of a rejection," said Michael
Ambuehl, the Swiss top official who negotiated the UBS deal.

"The ratification process of the new double taxation
agreement would also be in danger. That could have negative
consequences for the whole of Switzerland's economy," he said.

Ambuehl said his U.S. counterparts had told him they would
use all available options to get the data of the 4,450 clients
whom bankers at UBS, the world's No. 2 wealth manager, helped to
hide money from the U.S. taxman.

The right-wing Swiss People's Party (SVP), Switzerland's
biggest, opposes parliamentary approval of the deal but does not
have enough seats to block it alone.

The next-biggest Swiss party, the Social Democrats (SP),
could make or break the deal. It says it will only support it if
the government agrees to meet its demands for new measures
curbing bank risks and bankers' bonuses.

The Swiss government has suggested some measures in these
areas but has so far been unable to appease the SP entirely.

BACK TO SQUARE ONE

Failure to win parliamentary backing for the deal would be a
"catastrophe" for UBS and other Swiss banks at a time when the
Alpine nation is already under international attack over its
bank secrecy laws, a top Swiss financial executive told Reuters.

"That would put things back to where they were a year ago
and would trigger the restart of the John Doe summons," the
executive said, referring to the U.S. case to force UBS to hand
over client data. "That could spell the end of UBS."

UBS shares crumbled to an all-time low in the credit crisis
as $52.5 billion writedowns on risky debts pushed the bank to
the biggest annual loss in Swiss corporate history in 2008.

The U.S. tax dispute also risked bringing UBS down and
clients rattled by the legal dispute withdrew hundreds of
billions of dollars from the bank.

UBS, still struggling to stem the gush of client money,
would prefer to hand over the data so it can focus on rebuilding
its image, said Alois Pirker of consultants Aite Group.

"From a publicity perspective it's a huge burden on their
shoulders," said Pirker, a former UBS employee.

The tax deal also sets a dangerous precedent for the Swiss
banking industry, which has relied on its tradition of secrecy
and status as a safe haven for much of its success.

"The U.S. Internal Revenue Service will likely take the same
game plan that they followed with UBS and pursue it similarly
with other offshore financial institutions," said former U.S.
Justice Department prosecutor Michael Weinstein.

U.S. tax prosecutors are examining thousands of accounts
from foreign banks, including other Swiss banks, in data
obtained after the prosecution of UBS.

"The ramifications for Swiss banks depend on whether U.S.
authorities believe other banks marketed their services in a
similar way as UBS did," said Evan Stewart, a white-collar crime
expert at U.S. law firm Zuckerman Spaeder.

"It seems unlikely others sat back and just watched UBS do
it without being tempted to do it themselves."

SVP parliamentarian Hansruedi Wandfluh, who heads a
parliamentary economics committee, said there is wiggle room in
the agreement to negotiate further with the United States.

"I am not of the opinion that the United States is
interested in an economic war. That cannot be in the interest of
either the USA or Switzerland," said Wandfluh.

Legal experts are less convinced.

"Would the U.S. government and the IRS be willing to
renegotiate the agreement? I think the likelihood is no," said
Weinstein, currently of New Jersey-based law firm Cole Schotz.

"The U.S. and the IRS would take the big stick out."

(Editing by Sitaraman Shankar)