WASHINGTON, Jan. 28 (JTA) — Switzerland”s decision to establish a fund for Holocaust victims may signal a sea change in the way the embattled nation is confronting its wartime past. After months of pressure from world Jewish leaders, the Swiss government announced last week that it would work with Swiss banks and insurance companies to set up a fund to begin compensating Holocaust victims and their heirs whose assets vanished into the Swiss banking system half a century ago. Switzerland”s critics welcomed the move, which came six weeks after World Jewish Congress President Edgar Bronfman publicly called on Switzerland to make a “good faith financial gesture”” to Holocaust survivors and the world Jewish community. Jewish officials see the Swiss decision as an important breakthrough — a sign that Switzerland may finally be willing to offer both a financial and moral accounting of its dealings with the Nazis and its handling of Jewish assets. But just as Switzerland won rare praise from its leading critics, a new controversy erupted this week that threatened to create new strains. Carlo Jagmetti, Switzerland”s ambassador to the United States, resigned Monday after the publication of a confidential diplomatic cable he authored last month calling for a public relations “war”” against “adversaries,”” such as the WJC and Sen. Alfonse D”Amato (R-N.Y.) Jewish and U.S. government officials lambasted him and called his resignation appropriate. Over the course of the last year, Switzerland has found itself besieged by international criticism surrounding allegations that it hoarded the wealth of Holocaust victims while helping to finance the Nazi war effort. Last week”s decision to set up a fund “means they”re willing to address the two demands the Jewish world has placed before them: the demand for moral restitution and material restitution,”” said Elan Steinberg, executive director of the WJC. “By moral, we mean honestly addressing their history so that we may deal with each other in an honest fashion and face each other with dignity,”” he said. “By material, we mean returning to those victims who were deprived of their possessions the assets that clearly belong to them.”” Abraham Foxman, national director of the Anti-Defamation League, characterized the Swiss move as an important “psychological breakthrough.”” “Rather than being angry and defensive, they”re coming to grips and moving forward,”” said Foxman, who met with top political and banking officials earlier this month in Switzerland. D”Amato, who chairs the Senate Banking Committee, called the Swiss plan a “step in the right direction,”” as did State Department spokesman Nicholas Burns. The fund, Burns said, constitutes an important move for the Swiss “in the process of coming to terms with the past.”” Jewish organizations claim Swiss banks hold up to $7 billion in assets belonging to Jews killed in the Holocaust. But the Swiss banks say initial searches of their archives have found only $32 million in unclaimed assets. Tensions between Switzerland and the country”s critics reached their highest level early this year when the country”s outgoing president, Jean-Pascal Delamuraz, dismissed Jewish demands for a compensation fund as “extortion and blackmail.”” Delamuraz later apologized in the face of an international outcry. But the fallout from his remarks, coupled with the recent discovery by a night security guard that Switzerland”s largest bank was shredding archival material, began to “push the world”s patience to a limit,”” as one Jewish official put it. Trying to gain control of a situation rapidly spinning out of control, Thomas Borer, Switzerland”s point man for all issues concerning his country”s wartime financial role, announced that the Swiss government would work with banks to establish a Holocaust memorial fund. “We certainly hope that this”” fund “will be understood as a sign of our goodwill,”” Borer told reporters in Zurich last week. He said the government and Swiss banks had yet to arrive on a fixed amount for the fund, adding, “it would be premature to bring numbers into play.”” However, one of Switzerland”s top bankers, Credit Suisse Chairman Rainer Gut, last week called for a “well-endowed”” Holocaust memorial fund in excess of $70 million. The WJC declined to specify an amount it would deem appropriate, saying only that “it should be sufficient to cover the immediate needs”” of Holocaust survivors. A $250 million figure surfaced in a discussion late last year between Bronfman and Borer, but those negotiations — which were supposed to have remained confidential — later became a source of considerable rancor between Swiss and Jewish officials. WJC officials, for their part, said they will be in close contact with Swiss officials in coming weeks as they work out the specifics concerning the fund. The WJC has campaigned over the past year to recover missing Jewish wealth and disclose the truth about Switzerland”s role as a financial center during World War II. Researchers for the WJC, along with researchers on D”Amato”s staff, have combed through thousands of documents in the archives of the United States and European countries, releasing historical findings each week in a way that has consistently kept Switzerland in the news. Asked whether WJC”s strategy will now change after Switzerland”s “goodwill gesture,”” Steinberg indicated that his organization might turn down the heat a bit on Switzerland. “Our activities have involved a political struggle, and a political struggle requires a strategy or tactics that change with circumstances,”” Steinberg said. “If all parties are working in a cooperative manner for the benefit of Holocaust survivors, by definition, the situation will change.”” But the WJC still intends to make documents available, and more embarrassing revelations about Switzerland may be in the offing as the Clinton administration prepares to release a report on Switzerland”s wartime transactions. Swiss officials appear determined to avoid more of the public relations nightmares that have dogged them in recent weeks. This week got off to a bad start, however, when Switzerland had to quickly defuse the controversy stemming from publication of the Swiss ambassador”s private strategy paper. “This is a war that Switzerland must wage and win on the foreign and domestic front,”” Jagmetti was quoted as saying in the Dec. 19 document, which was leaked to the media. “You cannot trust most of the adversaries.”” Swiss Jewish leaders immediately called for the ouster of Jagmetti, who was set to retire in July. The Swiss Cabinet accepted his resignation Monday, in which he contended that the published excerpts were taking out of context and expressed regret for having caused any offense. Switzerland”s critics see encouraging signs in the way Switzerland has begun to show accountability and exercise damage control. But officials caution that a long road lies ahead. As Foxman of the ADL said, the Swiss are still in need of making a “quantum leap to moral accountability.”” “They”re coming to a realization, but they”re going to have to deal with the issue in a more dramatic and forceful way,”” Foxman said. “They”re going to have to confront the past in both a legal manner, factual manner and a moral manner, and I think that”s where they”re heading.”” While falling short of any such quantum leap, Switzerland”s critics agree that the country has now at least taken a few running steps in the right direction.