German Chancellor Angela Merkel is being advised to impose new taxes on the rich to pay for the ongoing bailouts to the weaker countries in the Eurozone.
“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 bail-out,” the Telegraph reports. The position is another sign from the German government of their intent on having the weaker economic countries contribute more in “exchange for using [Germany’s] economic might to support their finances.”
Apart from growing animosity between Germany and the smaller countries, the move to tax property and more tangible assets drags in British families who live or own homes inside the Eurozone.
“Around 400,000 Britons live or own homes in the south of Spain, which is suffering a deep recession that is hampering Madrid’s attempts to balance the public finances and stave off a bail-out,” the Telegraph writes.
The argument justifying the tax increase is that many richer homeowners in southern European states have escaped taxation, while their countries receive bailout money from Germany.
“The resourceful rich just move their money to banks in northern Europe and avoid paying,” Professor Peter Bofinger, an adviser to Merkel, said to Der Spiegel, a German magazine.
Bofinger has alternatively advised taxes on property which cannot be transfered to outside banks.
“For example, over the next 10 years, the rich should give up a portion of their assets,” Professor Bofinger, said.
The move to tax property and other less mobile assets, however, would be a “significant change” in bail-out funding, that until now, has relied on bond money investments.
“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,” the Telegraph reports.
A study released by the European Central Bank revealed that the residents of bailed out countries are often wealthier than Germans, who have propped up EU governments since the start of the global financial meltdown.
Median wealth in Cyprus, according to the study, is €267,000, compared to the median wealth in Germany of €51,000.
Average wealth in Cyrpus, €671,000, far exceeds that of the other AAA creditor states in the EU — Austria’s is €265,000, Germany’s is €195,000, Holland’s is €170,000, and Finland’s average wealth is €161,000.
“This shows that Germany has been right to take a tough line of euro rescue loans,” Professor Lars Feld, one of Merkel’s advisors, said.
The nature of this circumstance has lent more popularity the alternative für Deutschland, a eurosceptic party, which has become increasingly critical of Merkel’s decisions, beginning to call for Germany to leave the Eurozone to return to the Deutschmark.
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