A leading German economic research institute has come up with one way to help countries involved in the euro crisis pay down their sovereign debt: get the wealthiest citizens to pay higher taxes, or force them to loan their governments money.
Euro-zone citizens in the highest income brackets ought to pay more taxes, or be forced to offer their government loans as a way to combat the on-going euro crisis, a leading German economics research institute proposed in a new report issued on Wednesday.
"In many countries the sovereign debt levels have increased considerably, and at the same time we also have very high amounts of private assets that, taken together, considerably exceed the total national debts of all (euro-zone) countries," Stefan Bach, of the German Institute for Economic Research (DIW) in Berlin, said in an interview with the institute's weekly publication.
In order to stabilize the countries' finances and to reduce sovereign debt, the states could go after those private assets, said Bach, who authored the DIW study.
One-Time Levies Or Forced Loans
That could be done, Bach argued, either by issuing a one-time tax that could then be paid off over time, or by combining that tax with a forced loan that the wealthy would provide the governments. Depending on the progress made by the country in consolidation, these loans could then later be paid back, and with interest. When that is not the case, he said, the total would then turn into a wealth tax.