Germany’s Bundesbank said on Monday that countries about to go bankrupt should draw on the private wealth of their citizens through a one-off capital levy before asking other states for help.
“(A capital levy) corresponds to the principle of national responsibility, according to which tax payers are responsible for their government’s obligations before solidarity of other states is required,” the Bundesbank said in its monthly report.
It warned that such a levy carried significant risks and its implementation would not be easy, adding it should only be considered in absolute exceptional cases, for example to avert a looming sovereign insolvency.
The International Monetary Fund discussed the option in a report in October and said that reducing debt ratios to end-2007 levels for a sample of 15 euro area countries, a tax rate of about 10 percent on households with positive net wealth would be required.
The German Institute for Economic Research calculated in 2012 that in Germany a 10-percent levy on a tax base derived from a personal allowance of 250,000 euros would add up to around 230 billion euros. It did not give a figure for crisis countries due to lack of sufficient data.
Greece has been granted bailout funds of 240 billion euros from the euro area, its national central banks and IMF to protect it from a chaotic default and possible exit from the euro zone. Not all funds have been paid out yet.
In Germany, however, the Bundesbank said it would not support an implementation of a recurrent wealth tax, saying it would harm growth.
Recent reforms and adjustments in the euro zone’s struggling countries – Ireland, Greece, Spain, Italy, Cyprus and Portugal – have improved conditions for sustainable growth, the Bundesbank said, but remained concerned about high debt levels.
The Bundesbank’s tough stance comes after years of euro zone crisis that saw five government bailouts. There have also bond market interventions by the European Central Bank in, for example, Italy where households’ average net wealth is higher than in Germany. (full story Reuters)
PS Hm….. considering Greek way of thinking and imposing taxes, the capital levy would be imposed to everything that walks, swims, flies or crawls, preferably those with low income or no income at all… I herewith officially declare: Bundesbank proposal is a #FAIL!