• Germany edition
 
German economists: make the rich buy bonds
We'll have some of that, thank you. Photo: DPA

German economists: make the rich buy bonds

Published: 11 Jul 2012 11:26 GMT+02:00
Updated: 11 Jul 2012 11:26 GMT+02:00

The German Institute for Economic Research (DIW) suggested that those with a substantial private fortune be forced to hand over 10 percent of what they have over €250,000.

This would hit the richest eight percent of the population and would not lead to the feared reduction of consumer demand, it said.

The tactic could be adopted to raise money in crisis-hit countries across Europe, the DIW said in a statement.

“Leaning on large private fortunes could stabilise state finances in Europe,” said DIW expert Stefan Bach. The idea could be an important step towards consolidating public budgets, and make growth-promoting reforms easier, he argued.

Bach said private fortunes in the eurozone countries are greater than the state debts in Greece, Spain and Italy.

The DIW said fighting the current crisis with state money can only go so far, as most is tied up in infrastructure, the sale or privatisation of which only yields short term liquidity.

The private sector must become involved. “There are many historical examples of mandatory bonds and one-off capital levies,” Bach pointed out.

He said high personal allowances would be set to prevent people being impoverished – and the fortunes of companies would be protected to ensure smaller firms were not left unable to pay bills.

The DIW has calculated that all personal fortunes above €250,000 per person in Germany equals around 92 percent of the country's gross domestic product.

"If the people deliver ten percent of this excess value, it could produce nine percent of the gross domestic product – around €230 billion," he said. "With that one could bring the German debt down significantly closer to the Maastricht limit of 60 percent."

He said it was difficult to provide a clear estimate of what private fortunes would be worth for crisis countries because figures were not as reliable, but statistics showed they were clearly more than what the governments owe.

The advantage of a capital levy would be that those affected would find it more difficult to avoid than ordinary taxes. Combining it with mandatory bonds would also create the possibility of repaying some of the money, which would reduce opposition to the idea.

“Particularly in European crisis countries, a levy and mandatory bonds would be a sensible option and a signal for lender countries and funds that one was trying everything at home to secure their state financing," the DIW said. "And at the end of the day it would also work against the inequality that has clearly increased.”

The Local/hc

The Local (news@thelocal.de)

Your comments about this article

12:28 July 11, 2012 by Herr Rentz
Socialism in action.
12:38 July 11, 2012 by laurencelewis
@ Herr Rentz

Indeed, and a good idea! We should all contribute to society in proportion with the gains we reap from it. This is a principle everyone seems to understand, except when it is formed into a social ideology.
12:58 July 11, 2012 by William Thirteen
' jus primae noctis' in action!

cue panicked flight of pasty, pudgy overprivileged scions of the aristocracy.
13:56 July 11, 2012 by ChrisRea
I would gladly buy mandatory bonds provided that:

- they pay the normal interest paid by banks for deposits;

- the state budget has to have, by law, at least 2% surplus, guaranteed with the personal wealth of all politicians in public offices (unitary responsibility).

Deal?
14:18 July 11, 2012 by Eric1
This suggestion is immoral. These economist are only "respected" by Marxist revolutionaries.
15:08 July 11, 2012 by frankiep
"The German Institute for Economic Research (DIW) suggested that those with a substantial private fortune be forced to hand over 10 percent of what they have over €250,000. "

So now €250,000 is to be considered a "substantial private fortune"?!?! Just have to love how class warfare parasites keep moving the goalposts. If they keep this up, in 20 years people who earn €50,000 per year will be considered obscenely rich "one percenters" and be taxed at a rate of 75%.

€250,000 in the bank is certainly not poor, but, despite what people like William Thirteen claim, it is also certainly not wealthy or the sign of someone being a "pasty, pudgy overprivileged scion of the aristocracy".
17:01 July 11, 2012 by zeddriver
I find it rather funny in a very sad way. That a majority of most governments financial issues tend to come from spending more than you have. And why do they have less money than they need. Simple they ALWAYS over promise to get votes. A lot of folks look at the US and say that the problem is the rich, the military. The biggest outlay of cash by huge margins is social security, medicare, And medicaid. And for every dollar that goes into those programs more than half is removed simply to run it. The other half is spent just as fast as it comes in on programs other than what the money was earmarked for. The politicians just put in IOU's. And of course. The politicians put ALL the blame on the rich. The rich do deserve SOME of the blame. But MOST of the blame lays at the feet of the same people we as voters request to take more from the rich to fix the problems that THEY have created. "politicians" And the cycle continues. In fact. In a recent study. If the government of the US were to take ALL of the assets and property. Sold all of the companies of everyone making over $250,000. the amount of money raised would only fund the budget deficit for ONE WHOLE YEAR. Then what! We still would owe 15 trillion.
19:35 July 11, 2012 by mitanni
You get EU 250000 if you save about EU 300/month for 30 years. That's supposed to be "rich"? So people who save modestly and manage to accumulate a nest-egg are now supposed to pay for the debts racked up by people who vote themselves more and more government services and can't be bothered to save?
20:46 July 11, 2012 by IchBinKönig
@ Eric1

'This suggestion is immoral. These economist are only "respected" by Marxist revolutionaries. '

Ha. Isn't that thelocal demographic? You know, the smug set with government for religion.
13:54 July 12, 2012 by Insel-Affe
This has a snowball's chance in hell of coming through, especially with Schaeuble working on new tax loopholes for his rich buddies with cash hidden in Switzerland!
20:18 July 15, 2012 by pjnt
Stop spending money you don't have and make a surplus mandatory for any serving government.

The rest will take care of itself.
Today's headlines
Rocket Internet shares disappoint on first day
It was more of a bear than a bull market for Rocket Internet co-founder Oliver Samwer (centre). Photo: DPA

Rocket Internet shares disappoint on first day

Start-up platform Rocket Internet entered the Frankfurt stock market on Thursday, in what was hailed as a milestone for German online firms, but the company's share price immediately fell by more than ten percent. READ  

How good is Germany for the elderly?
Photo: DPA

How good is Germany for the elderly?

A study comparing quality of life for older people around the world has ranked Germany 5th out of 96 countries. How good a place is Germany for the elderly? READ  

Cars set on fire across Berlin overnight
A burnt out car on Alten Jakobstraße, Kreuzberg, on Thursday morning.

Cars set on fire across Berlin overnight

Ten cars were set on fire across Berlin on Wednesday night and Thursday morning in the second night of disturbances in the city. READ  

Organized crime on the rise in Germany
Police escort a motorcycle gang in Schleswig-Holstein. Photo: DPA

Organized crime on the rise in Germany

Organized criminals are increasingly active in Germany, with the mafia as well as biker and international gangs making headway in the country, according to a government report. READ  

Nazi hunters find 80 living 'war criminals'
Jerusalem's Simon Wiesenthal Centre director Efraim Zuroff at the launch of a campaign to find remaining war criminals last year. Photo: DPA

Nazi hunters find 80 living 'war criminals'

The Israeli branch of the Simon Wiesenthal Centre on Wednesday urged Germany to prosecute alleged members of Nazi death squads during World War II, giving it a list of 80 suspects. READ  

Germany ranks third in world university list
Students at Munich's LMU. Photo: DPA

Germany ranks third in world university list

German universities have shot up the world's leading higher education rankings, with Germany now having more institutions among the world's best than any other country after the US and UK. READ  

The Local List
Eight expat groups to save you in Germany
Photo: Jan Perlich/Munich RFC

Eight expat groups to save you in Germany

Think you're the only English speaker in your town or region? Think again! The Local List this week runs through eight of the best expat groups and clubs in Germany. READ  

Victims of GDR regime get benefit boost
Former GDR political prisoners Hartmut (l) and Gerda Stachowitz in a East Berlin prison which has stood empty for 20 years. Photo: DPA

Victims of GDR regime get benefit boost

Benefit payments to former political prisoners of ex-communist East Germany (GDR) will be raised to send an "important message" 25 years after the fall of the Berlin Wall, the government said on Wednesday. READ  

Cabinet agrees cap on city rent rises
Apartments in Leipzig. Photo: DPA

Cabinet agrees cap on city rent rises

Germany's cabinet agreed on Wednesday to cap ballooning property rents in high-demand urban neighbourhoods in a law set to come into force early next year. READ  

Berlin flights disrupted by WWII bomb find
Passengers are delayed at Tegel Airport. Photo: DPA

Berlin flights disrupted by WWII bomb find

UPDATE: The discovery of a US World War II bomb disrupted flights at Berlin’s Tegel Airport on Wednesday afternoon, with no flights taking off or landing for 30 minutes. The bomb has now been defused but later flights are still delayed. READ  

RECEIVE OUR NEWSLETTER AND ALERTS
Photo: Shutterstock
Gallery
Eight expat groups to save you in Germany
Munich
Bavarian independence becomes a reality... (online)
Photo: DPA/Police
National
'Criminals are at work in refugee homes'
Photo: DPA
Business & Money
Immigrants have created how many German jobs?
Photo: DPA
National
Revealed: Germany's military feet of clay
Marks & Spencer
Sponsored Article
Marks and Spencer: Win €300 toward your new autumn wardrobe
Photo: Shutterstock
Society
Quiz: How good is your German?
Photo: DPA
Gallery
Thousands take to Berlin's streets for marathon
Photo: DPA
Society
'Incest should be legal,' says ethics board
Photo: DPA
Gallery
Ten noises that sound very different in German
Photo: DPA
Society
QUIZ: Can you pass the German citizenship test?
Photo: Shutterstock
Gallery
Ten German words you'll never want to hear again
Photo: DPA
Business & Money
JobTalk: All you need to know about working in Germany
National
Share news tips with The Local Germany
Latest news from The Local in Austria

More news from Austria at thelocal.at

Latest news from The Local in Switzerland

More news from Switzerland at thelocal.ch

Latest news from The Local in Denmark

More news from Denmark at thelocal.dk

Latest news from The Local in Spain

More news from Spain at thelocal.es

Latest news from The Local in France

More news from France at thelocal.fr

Latest news from The Local in Italy

More news from Italy at thelocal.it

Latest news from The Local in Norway

More news from Norway at thelocal.no

Latest news from The Local in Sweden

More news from Sweden at thelocal.se

3,155
jobs available
Toytown Germany
Germany's English-speaking crowd