Swiss set up committee to stifle Italy tax row

* Swiss want to stop situation from escalating

* Swiss FinMin says tax talks won't resume while amnesty runs

ZURICH, Nov 4 (Reuters) - The Swiss government has set up a working group charged with finding ways to stifle a bitter tax row with the Italians that escalated after Rome raided 76 Swiss banks in Italy.

Italy aims, through a generous tax amnesty, to capture billions of euros of undeclared money hidden at Swiss banks.

The move poses a specific threat to banks in the Italian-speaking canton of Ticino, where more than 200 billion Swiss francs ($195 billion) of Italian money is held.

"The aim of the working group is to stop a further escalation of the situation," Swiss Finance Minister and President Hans-Rudolf Merz told a press conference on Wednesday.

"We do not want to start a "war" against Italy. We want to and must find a solution."

Switzerland summoned the Italian ambassador to Berne for an explanation after the raids on the banks. [ID:LS725977]

It also decided to suspend negotiations on a new double-taxation agreement that would allow Italy to access more information than before on tax evaders.[ID:nL1538978]

Switzerland has already signed a dozen of these tax deals after agreeing in March to adhere to international standards for tax transparency and cooperation.

Merz said the negotiations will not be resumed for the duration of the tax amnesty, which is currently expected to run until mid-December.

Under the amnesty, tax offenders will be able to come clean by paying a one-off payment of 5 percent of assets and their anonymity will be protected. ($1=1.025 Swiss Franc) (Writing by Lisa Jucca; Editing by Jon Loades-Carter)