FRANKFURT Jan 27 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.
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.
"(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
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.
It was still a key challenge to drive down public as well as
private debt and the ECB's upcoming bank health checks could
help to address current problems in the banking sector.
A successful test could also help to wean banks in the euro
zone periphery countries off ECB funding, the Bundesbank said.
"It is not the purpose of European monetary policy to ensure
solvency of national banking systems or governments and it
cannot replace necessary economic adjustments or bank balance
sheet clean ups," the Bundesbank said.