Angela Merkel grows tired of feeding weaker Euro nations.
Look out for assets in Spain, Portugal and Greece.
German 'Wise Men' Push For Wealth Seizure To Fund EU Bailouts
By Ambrose Evans Pritchard
Senior advisers to Chancellor Angela Merkel are pushing for better-off households to pay towards the cost of any future bailouts for the weaker members of the single currency. The proposals, from members of Germany’s council of economic experts, raise the prospect of taxes being imposed on property in a country like Spain if its government was forced to seek a bailout.
The council, known as the “Five Wise Men”, is often used to test new policies that are later adopted officially.
The German suggestion is the latest sign that Berlin is intent on imposing even tougher rules on weaker southern euro members in exchange for using its economic might to support their finances. As well as inflaming tensions between Germany and its smaller southern partners, the suggestion could also mean that Britons with holiday homes are dragged deeper into the eurozone crisis.
Senior figures in Germany are now arguing that some richer home owners in countries like Spain, Portugal and Greece have so far avoided paying their fair share to rescue the euro, leaving Germany paying too much.
Taxes on property or other assets would mark a significant change in Europe’s approach to funding bail-outs for eurozone members. Until now, the cost of rescue packages for countries like Ireland, Greece and Portugal has fallen largely on people who invest money in either those countries’ bonds or – in the case of Cyprus – bank accounts.
Prof Peter Bofinger, an adviser to Mrs Merkel, said that levies on bank accounts are the wrong way of funding bail-outs, because rich people are able to shift their money out of the country.
“The resourceful rich just move their money to banks in northern Europe and avoid paying,” Prof Bofinger told Der Spiegel.
Instead of taxing cash, European Union governments should in future target property and other, less mobile assets, he said.
“For example, over the next 10 years, the rich should give up a portion of their assets,” Prof Bofinger said. Spain was last year forced to seek international help to prop up its banks. Despite recent signs of progress, some analysts believe the Spanish government itself could also have to seek a bail-out in order to pay its debts.
Spain is suffering from the bursting of a huge property bubble that has left many home owners struggling to sell houses for much less than the price they paid. A “sovereign rescue” of Spain would dwarf any previous eurozone bail-out package, with Germany again likely to pay the lion’s share.
Mrs Merkel, who seeks re-election later this year, is coming under increasing pressure to drive an even harder bargain in Europe from German voters unhappy at footing the bill for what they see as southern profligacy. Southern eurozone governments have argued that it is right for Germany to pay more because it is wealthier and because its economy has gained so much from the single currency.
But German economists are now challenging that argument. They say that new figures taking into account property values show that people in many southern countries are actually wealthier than their German counterparts.
Prof Lars Feld, another “wise man”, highlighted a recent study by the European Central Bank, which Germans say show that the people in bailed-out countries are often better-off than those in Germany. Less than half of Germans own their own home, lower than the rate in many southern eurozone members.
The ECB study found that the “median” wealth in Cyprus is €267,000 (£227,600), compared to just €51,000 in Germany. The median or midpoint level – which strips out the distorting effect of the super-rich – was €183,000 for Spain, €172,000 for Italy, and €102,000 for Greece, and even €75,000 for Portugal.
Average wealth in Cyprus is €671,000, far higher than in the four AAA creditor states: Austria (€265,000), Germany (€195,000), Holland (€170,000), Finland (€161,000).
Prof Feld said the report showed that people in the crisis countries are richer than the Germans. “This shows that Germany has been right to take a tough line of euro rescue loans,” he said.
Alternative für Deutschland, a German eurosceptic party, is putting Mrs Merkel under increasing pressure in her response to the eurozone’s prolonged crisis. Many members of the new party, which held its first conference on Sunday, want Germany to pull out of the euro and revert to the Deutschmark.
Source - Telegraph (Reprinted with permission)
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