• Germany's news in English

German economists: make the rich buy bonds

The Local · 11 Jul 2012, 11:26

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

Facebook Twitter Google+ reddit

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.

Story continues below…

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)

Facebook Twitter Google+ reddit

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).

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
Creepy clown scare spreads to Germany
Two of the clowns were apparently equipped with chainsaws. Photo: Pedro Pardo / AFP file picture

Police said Friday five incidents involving so-called scary clowns had occurred in two north German town, including one assailant who hit a man with a baseball bat, amid fears that Halloween could spark a rash of similar attacks.

Student fined for spying on women via their webcams
Photo: DPA

Student from Munich fined €1,000 for spying on 32 different computers, using their webcams to take photographs, or record their keyboard history.

This is how much startup geeks earn in Germany
Photo: DPA

A comprehensive new survey of 143 startup founders shows how much you are likely to be earning at a German startup, from entry level all the way up to sitting on the board.

Man dies after beating for peeing near Freiburg church
The Johannes Church in Freiburg. Photo Jörgens Mi/Wikipedia

A middle-aged man from southern Germany has died after being attacked by a group of men who took umbrage with the fact he was urinating in the vicinity of a church.

The Local List
Seven German celebrities with uncanny doppelgängers
Former Berlin mayor Klaus Wowereit and actor Alec Baldwin. Photo: DPA; Gage Skidmore, Wikimedia Commons

Check out these seven look-a-likes of well known German figures - we admit that some are more tenuous than others...

Israel seeks to buy three new German submarines: report
A Dolphin class submarine. Photo: DPA

Israel is seeking to buy three more advanced submarines from Germany at a combined price of €1.2 billion, an Israeli newspaper reported Friday.

Here’s where people live the longest in Germany
Photo: DPA

Germans down south seem to know the secret to a long life.

More Germans identify as LGBT than in rest of Europe
Photo: DPA

The percentage of the German population which identifies as lesbian, gay, bisexual or transgender is higher than anywhere else in Europe, according to a new study.

'Reichsbürger' pair attack police in Saxony-Anhalt
File photo: DPA.

A "Reichsbürger" and his wife attacked police officers on Thursday, just a day after another Reichsbürger fatally shot an officer in Bavaria.

Five things not to miss at the Frankfurt Book Fair
Photo: DPA

From consulting a book doctor to immersing yourself in an author's world with the help of virtual reality, here are five things not to miss at this week's Frankfurt Book Fair, the world's largest publishing event.

Sponsored Article
How to vote absentee from abroad in the US elections
10 things you never knew about socialist East Germany
Sponsored Article
Last chance to vote absentee in the US elections
How Germans fell in love with America's favourite squash
How I ditched London for Berlin and became a published author
Sponsored Article
How to vote absentee from abroad in the US elections
12 clever German idioms that'll make you sound like a pro
23 fascinating facts you never knew about Berlin
9 unmissable events to check out in Germany this October
10 things you never knew about German reunification
10 things you're sure to notice after an Oktoberfest visit
Germany's 10 most Instagram-able places
15 pics that prove Germany is absolutely enchanting in autumn
10 German films you have to watch before you die
6 things about Munich that’ll stay with you forever
10 pieces of German slang you'll never learn in class
Ouch! Naked swimmer hospitalized after angler hooks his penis
Six reasons why Berlin is now known as 'the failed city'
15 tell-tale signs you’ll never quite master German
7 American habits that make Germans very, very uncomfortable
Story of a fugitive cow who outwitted police for weeks before capture
Eleven famous Germans with surnames that'll make your sides split
The best ways to get a visa as an American in Germany
jobs available
Toytown Germany
Germany's English-speaking crowd