Speaking to state radio station SWR on Friday, Franz, president of the Centre for European Economic Research (ZEW), said there was no room for tax cuts in this legislative period, but the government should have consolidated its finances by 2016.
Franz also said the current euro-crisis needed to be brought under control, and that private financial institutions should also be made to share the burden. “It’s unacceptable that they receive high interest payments and pass on the risks to the tax-payer,” Franz said.
Instead, private banks should waive interest payments and extend credit repayment terms, the economist suggested.
Franz also said it was possible in principle to install a European economic government. Franz suggested its purpose should be to better coordinate financial policy and crisis management. This would prevent what Franz called “cloak and dagger” measures like the sudden, billion-euro bailouts of 2010.
But Franz admitted that national governments would be loathe to lose their responsibility for tax and budget policies. “This will only happen in very small steps,” Franz predicted.