Wealth tax to pay for EU bail-outs

[WestVirginiaRebel]

UK Telegraph:

Senior advisers to Chancellor Angela Merkel are pushing for better-off households to pay towards the cost of any future bail-outs 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 bail-out.

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.

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.

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, a German magazine.

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.

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The welfare state has to be paid for somehow...