14 April 2013

Telegraph: German 'Wise Men' push for wealth seizure to fund EMU bailouts

Two top advisors to Angela Merkel have called for a tax on private wealth and property in eurozone debtor states to force the rich to fund rescue costs, marking a radical new departure for EMU crisis strategy.

Professors Lars Feld and Peter Bofinger said states in trouble must pay more for their own salvation, arguing that there is enough wealth in homes and private assets across the Mediterranean to cover bailout costs. “The rich must give up part of their wealth over the next 10 years”, said Prof Bofinger. The two economist are members of Germany’s Council of Economic Experts or “Five Wise Men”, a body that advises the Chancellor on major issues. There is no formal plan to launch a wealth tax but the council is often used to fly kites for new policies.

Any attempt to enforce a wealth tax in future rescue talks will be seen by Club Med as further evidence that the Northern powers will try to impose all the burden of crisis adjustment on those in trouble rather than accepting their own shared responsibility for the failings of the EMU. This comes a day after Germany said over the weekend that there could be no banking union after all without a fresh EU treaty, effectively kicking the issue into touch for years.

Any serious move to a wealth tax could erode the pro-euro ardour of South Europe’s über-rich. The ECB bond-buying policy has largely rescued the wealthiest strata, while the full brunt of EMU austerity has fallen on ordinary people and the unemployed. The political debate on euro membership may change dramatically if rich Cypriots, Italians, Spaniards and Portuguese start to see EMU as a threat to their property, rather than a defence.

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