Is It Political Suicide For Paul Ryan To Still Be Hawking A Failed European Austerity Agenda?

Martin Wolf's autopsy of Europe's Austerity Agenda for the New York Review of Books doesn't even mention Paul Ryan. But I hope Democrat Rob Zerban, who nearly beat Ryan in 2012 and will take him on again next year, is reading it and absorbing it. It really is-- at least as much as Ayn Rand's adolescent writing-- what Ryan is all about.

After Ryan's buddies in the state legislature gerrymandered WI-01 to make it redder and safer, Ryan managed to beat Zerban 55-43%, his closest call since he was first elected. Zerban won his home county, Kenosha, and he also won Ryan's home county, Rock. Ryan swamped him, 73-25%, in the clueless, blood red Republican heartland that had been appended onto the district in Waukesha County. The biggest county, Racine, was very close. Ryan took it with 51%. Next year Zerban will win Racine by a bigger margin than that. I doubt many people in Waukesha read the NY Review of Books or even have a clear idea what the Austerity Agenda Ryan has been trying to import to America, even is. It will be up to Zerban to help these folks understand it-- and how it impacts them and their families. Wolf, who works for the Financial Times, is one of the world's most highly regarded and influential economic journalists. In his words, "Austerity has failed. It turned a nascent recovery into stagnation. That imposes huge and unnecessary costs, not just in the short run, but also in the long term: the costs of investments unmade, of businesses not started, of skills atrophied, and of hopes destroyed." He isn't alone as seeing it as one gigantic blunder, one that should, in a rational world, sink the careers of austerians like Paul Ryan.

Austerity came to Europe in the first half of 2010, with the Greek crisis, the coalition government in the UK, and above all, in June of that year, the Toronto summit of the group of twenty leading countries. This meeting prematurely reversed the successful stimulus launched at the previous summits and declared, roundly, that "advanced economies have committed to fiscal plans that will at least halve deficits by 2013."

This was clearly an attempt at austerity, which I define as a reduction in the structural, or cyclically adjusted, fiscal balance-- i.e., the budget deficit or surplus that would exist after adjustments are made for the ups and downs of the business cycle. It was an attempt prematurely and unwisely made. The cuts in these structural deficits, a mix of tax increases and government spending cuts between 2010 and 2013, will be around 11.8 percent of potential GDP in Greece, 6.1 percent in Portugal, 3.5 percent in Spain, and 3.4 percent in Italy. One might argue that these countries have had little choice. But the UK did, yet its cut in the structural deficit over these three years will be 4.3 percent of GDP.

What was the consequence? In a word, "dire."

In 2010, as a result of heroic interventions by the monetary and fiscal authorities, many countries hit by the crisis enjoyed surprisingly good recoveries from the “great recession” of 2008–2009. This then stopped. The International Monetary Fund now thinks, perhaps optimistically, that the British economy will expand by 1.8 percent between 2010 and 2013. But it expanded by 1.8 percent between 2009 and 2010 alone. The economy has now stagnated for almost three years. Even if the IMF is right about a recovery this year, it will be 2015 before the economy reaches the size it was before the crisis began.

The picture in the eurozone is worse: its economy expanded by 2 percent between 2009 and 2010. It is now forecast to expand by a mere 0.4 percent between 2010 and 2013. Austerity has put the crisis-hit countries through a wringer, with huge and ongoing recessions. Rates of unemployment are more than a quarter of the labor force in Greece and Spain.

...Why is strong fiscal support needed after a financial crisis? The answer for the crisis of recent years is that, with the credit system damaged and asset prices falling, short-term interest rates quickly fell to the lower boundary—that is, they were cut to nearly zero. Today, the highest interest rate offered by any of the four most important central banks is half a percent. Used in conjunction with monetary policy, aggressive and well-designed fiscal stimulus is the most effective response to the huge decrease in spending by individuals as they try to save money in order to pay down debt. This desire for higher savings is the salient characteristic of the post–financial crisis economy, which now characterizes the US, Europe, and Japan. Together these three still make up more than 50 percent of the world economy.

Of course, some think that neither monetary nor fiscal policy should be used. Instead, they argue, we should “liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.” In other words, sell everything until they reach a rock-bottom price at which point, supposedly, the economy will readjust and spending and investing will resume. That, according to Herbert Hoover, was the advice he received from Andrew Mellon, the Treasury secretary, as America plunged into the Great Depression. Mellon thought government should do nothing. This advice manages to be both stupid and wicked. Stupid, because following it would almost certainly lead to a depression across the advanced world. Wicked, because of the misery that would follow.

...The UK certainly did have alternatives-- a host of them. It could have chosen from a wide range of different fiscal policies. The government could, for example, have:

1. Increased public investment, rather than halving it (initially decided by Labour), when it enjoyed zero real interest rates on long-term borrowing.

2. It could have cut taxes.

3. It could have slowed the pace of reduction in current spending.

It could, in brief, have preserved more freedom to respond to the exceptional circumstances it confronted.

Why did the government not do so?

1. It believed, and was advised to believe, that monetary policy alone could do the job. But monetary policy is hard to calibrate when interest rates are already so low (at or close to zero) and potentially damaging particularly in the form of asset bubbles. Fiscal policy is not only more direct, but it can also be more easily calibrated and, when the time comes, more easily reversed.

2. The government believed that its fiscal plans gave it credibility and so would deliver lower long-term interest rates. But what determines long-term interest rates for a sovereign country with a floating exchange rate is the expected future short-term interest rates. These rates are determined by the state of the economy, not that of the public finances. In the emergency budget of June 2010, the cumulative net borrowing of the public sector between 2011 and 2015–2016 had been forecast to be £322 billion; in the June 2013 budget, this borrowing is forecast at £539.4 billion, that is, 68 percent more. Has this failure destroyed confidence and so raised long-term interest rates on government bonds? No.

3. It believed that high government deficits would crowd out private spending-- that is, the need of the government to borrow would leave less room for private borrowing. But after a huge financial crisis, there is no such crowding out because private firms are reluctant to invest, and consumers are reluctant to spend, in a weak economic environment.

4. It argued that the UK had too much debt. But the UK government started the crisis with close to its lowest net public debt relative to gross domestic product in three hundred years. It still has a debt ratio much lower than its long-term historical average (which is about 110 percent of GDP).

5. The government argued that the UK could not afford additional debt. But that, of course, depends on the cost of debt. When debt is as cheap as it is today, the UK can hardly afford not to borrow. It is impossible to believe that the country cannot find public investments-- the cautious IMF itself urges more spending on infrastructure-- that will generate positive real returns. Indeed, with real interest rates negative, borrowing is close to a “free lunch.”

6. The government now believes that the UK has very little excess capacity. But even the most pessimistic analysts believe it has some. Of course, the right policy would address both demand and supply, together. But I, for one, cannot accept that the UK is fated to produce 16 percent less than its pre-crisis trend of growth suggested. Yes, some of that output was exaggerated. There is no reason to believe so much was.

We, on this side of the argument, are certainly not stating that premature austerity is the only reason for weak economies: the financial crisis, the subsequent end of the era of easy credit, and the adverse shocks are crucial. But austerity has made it far more difficult than it needed to be to deal with these shocks.

The right approach to a crisis of this kind is to use everything: policies that strengthen the banking system; policies that increase private sector incentives to invest; expansionary monetary policies; and, last but not least, the government’s capacity to borrow and spend.

Failing to do this, in the UK, or failing to make this possible, in the eurozone, has helped cause a lamentably weak recovery that is very likely to leave long-lasting scars. It was a huge mistake. It is not too late to change course.

It won't be easy, but if Rob Zerban can convey this to suburban votes in southern Milwaukee County, the suburban areas of Racine County and to at least some of the folks living south and west of the city of Waukesha from Muskego to Mukwonago to North Prairie and Wales, we'll never hear from Paul Ryan again-- which would be a tremendous boon to working families all over America.

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It Wasn't A Happy May Day, Not In Europe-- And Probably Not At Chez Paul Ryan

Except for Seattle, it was a pretty quiet May Day here in the U.S. where Boehner, Ryan, Miss McConnell and Obama are introducing the devastating Austerity agenda more gradually than they did in Europe. May Day was marked by protests by workers across the globe, starting in Asia, with as many as 150,000 demonstrators getting the ball rolling in Jakarta, while smaller protests sprang up in Seoul, Phnom Penh, Dhaka and Manila.

With 80 countries around the world marking May 1 as a public holiday, Istanbul's Taksim Square was in lockdown on Wednesday, after the Turkish government banned May Day protests there.

The square is the site of a 1977 May Day massacre in which dozens of people died under disputed circumstances.

Al Jazeera's Hashem Ahelbarra, reporting from Istanbul, said: "There have been scuffles, particularly in areas that lead to Taksim Square, which has been sealed off.

"Protesters say they should be given access to celebrate May 1 in a place of symbolic importance; they want to honour the memory of those who were killed here. There is a tug of war under way between the government and people."

...In Moscow, the Russian capital, authorities sanctioned 16 separate rallies, including one led by Vladimir Putin's ruling United Russia party.

Other groups, including the Communist Party, are holding gatherings of their own. Up to 90,000 people are expected.

Protests in Greece were widespread and included a major transport workers strike but were generally peaceful. There were demonstrations in 80 Spanish cities, were Austerity is especially catastrophic to a devastated middle class and where the unemployment rate in 27%. And in Italy, the new Pope took the side of working people over the oligarchs and plutocrats. It must have infuriated Catholic fascists in America like Paul Ryan to see Pope Francis denouncing Austerity yesterday.

Pope Francis on Wednesday urged political leaders to make every effort to create jobs and said unemployment was caused by economic thinking “outside the bounds of social justice.”

“I call on politicians to make every effort to relaunch the labor market,” the Argentine pope told thousands of followers at his weekly general audience in St. Peter’s Square, which coincides with May Day demonstrations around the world.

“Work is fundamental for dignity,” he said.

“I think of labor market difficulties in various countries. I think of people, not just young people, who are unemployed often because of an economic conception of society based on selfish profit outside the bounds of social justice,” he said.

Paul Krugman warned his European counterparts they were heading in the wrong direction-- and still are. "Sometimes," he prodded, "economists in official positions give bad advice; sometimes they give very, very bad advice; and sometimes they work at the OECD."

It’s almost exactly three years since the Paris-based OECD gave what may have been the worst advice of any major international organization-- worse than the European Commission, worse than the ECB. Not only did it join in the demand for fiscal austerity, it also demanded that the US start raising interest rates rapidly, so as to head off the threat of inflation-- even though its own models showed no such threat.

So here we are three years later. No inflation takeoff in America (and the Fed trying to find ways to boost demand at a zero rate); austerity economics has crashed and burned; the latest numbers from Eurostat look like this:

And what is the OECD’s chief economist (still the same person) saying?

The euro zone is at risk of snatching defeat from the jaws of victory by abandoning efforts to cut budget deficits and fix long-standing economic problems, the Organization for Economic Cooperation and Development‘s chief economist warned Monday.

…Mr. Padoan said the growing perception that austerity has been futile is incorrect.

“Fiscal consolidation is producing results, the pain is producing results,” he said.

He added that euro-zone policy makers need to do a better job of communicating their successes to a weary population.

I believe that’s eurospeak for “the beatings will continue until morale improves.”

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Maybe It Really Isn't Fair To Always Just Blame The Germans

The conventional wisdom runs something like this: the northern European (Protestants) are industrious and thrifty and the southern Europeans + the Irish (Catholics) are slackers and high livers who squander their wealth on wine and women. Or... the Nazis won the long-war after all and are now cracking the whip to make everyone in Europe act like a good little Germans-- or starve. After all, who really gained the most from the creation of the Common Market and the Eurozone? German industry is well... very much über alles. Cyprus, Spain, Italy, Portugal, Greece... not so much. German banks have, conventional wisdom has it, underwritten their spendthrift ways-- or at least their ability to buy expensive German manufactured goods.

Over the weekend, Der Spiegel offered an alternative interpretation, basically, why don't the 1% in these crooked countries pay their fair share and stop avoiding taxes? Like here in the U.S. "interest rates are very low, because the ECB [like the Fed] is flooding the euro zone with money to stabilize the system. People who save their money are currently getting the short end of the stick, as they are stealthily being dispossessed. On the other hand, those with enough money to invest in stocks and real estate are benefiting from the boom triggered by the flood of funds coming from the ECB. In other words, taxpayers and ordinary savers are paying for the euro rescue efforts, which are primarily benefiting the rich in Europe's most troubled economies. Their assets remain largely untouched, while the assets of their rescuers are melting away... [T]he aid programs to date have only replaced old loans with new ones, so that the borrower countries will never shed their heavy debt burdens." Ordinary Germans are getting sick of being painted as the bad guys, although keep in mind when you read the numbers below that the averages reflect that many of these southern Europeans countries have much, much less economic equality than the northern countries do. The rich are really rich (and powerful) and the poor are getting poorer and the middle class in smaller, less powerful... and shrinking.

[T]here is also a second image of Germany, one that's based on numbers, not emotions. The figures were obtained by the European Central Bank (ECB) and released last week. This image depicts a country whose households own less on average than those that are asking for its money.

In this ranking of assets, Cyprus is in second place Europe-wide, while Germany ranks much lower, even lower than two other crisis-ridden countries, Spain and Italy.

And this Cyprus, with its affluent households, is now supposed to receive €10 billion ($13.1 billion) from the European Stability Mechanism (ESM), the Euro Group's permanent bailout fund, and the International Monetary Fund (IMF), at least according to the decisions reached after dramatic negotiations, which the German parliament, the Bundestag, is expected to approve this week. But a new question is arising: Why exactly are we doing this? Isn't Cyprus rich enough to help itself?

In light of the new ECB study, a new discussion of the Euro Group's bailout strategy is indeed necessary. So far taxpayers have born the risks of this strategy, by guaranteeing all loans the ESM has paid out to needy countries. Greece, Ireland, Portugal and Spain are already part of this group, and now Cyprus has been added to the mix.

...It would be more sensible-- and fairer-- for the crisis-ridden countries to exercise their own power to reduce their debts, namely by reaching for the assets of their citizens more than they have so far. As the most recent ECB study shows, there is certainly enough money available to do this.

The numbers are potentially explosive. For instance, the average German household has assets of €195,000, almost €100,000 less than the average Spanish household. The average net wealth of households in Cyprus is €671,000, more than three times the German value. Italian and French households are also significantly wealthier than their German counterparts.

The differences are even more pronounced when it comes to median net wealth, which is the level that the lower half of the population just reaches and the upper half exceeds. On this measure, Germany, at €51,400, is actually in last place in the euro zone. The corresponding value for Cyprus is five times as high. Median net wealth is even higher in crisis-rattled Portugal than in Germany.

The conclusions of the ECB study had hardly been published before various efforts to relativize and whitewash the figures began. The results were apparently embarrassing to the ECB itself, but also to the German government.

...[T]he differences in wealth were mainly attributable to property ownership habits in the various countries. Whereas just over 80 percent of households own their own homes in Spain (83 percent) and Slovenia (81.6), and even 90 percent in Slovakia, this is true of only 44 percent of Germans.

...Nevertheless, some attempts to downplay differences in wealth within the euro zone are reminiscent of card tricks. One argument holds that the Germans are portrayed as being too poor, because their figures do not account for their claims against the government pension system. In other countries, people provide for their retirement by buying property, which Germans don't have to do because they have government pension insurance.

But this is a spurious argument. Claims against a government pension fund do not constitute the asset accumulation in the classic sense, but rather a promise that could quite possibly not be kept. The current working generation pays for the pensions of retirees, which is precisely why pension claims cannot be reflected in the wealth calculation. They are offset by the younger generation's obligation, which is essentially a liability to vouch for the claims.

There are in fact understandable reasons why the Germans even lag behind such crisis-ridden countries as Greece, Cyprus and France when it comes to asset accumulation. In the last 100 years, Germans have been the victims of several events with the traits of expropriation. The hyperinflation of the 1920s, a consequence of World War I, destroyed the wealth of a middle class that had seen its fortunes consistently improve during the German Empire.

The monetary reform of 1948 eliminated the Reichsmark, which had become worthless after Germany's defeat in World War II, and wiped out the savings of an entire nation. In East Germany, 40 years of socialism destroyed the last vestiges of wealth and property. In the less than 23 years since German reunification, residents of the former East German states have not yet managed to attain the same levels of affluence as their fellow Germans in the west.

Most countries in the euro zone were spared such disasters. Either they emerged victorious from the two world wars, like France, or they remained neutral, like Spain. Either way, their citizens were able to build wealth over generations.

...The numbers, Italy's leading business newspaper Il Sole 24 Ore wrote, seem to suggest that "la Bundesbank" were trying to say to us: "You're the rich ones, and if you have problems, kindly solve them on your own."

Italy isn't swimming "in money, but in poverty," the paper argued, noting that 16.5 percent of Italians are considered poor while only 13.4 percent of Germans fall below the poverty line. The Italian central bank prepared its own report, which emphasized that Italy has more poverty and a lower average income, but also more wealth and less private debt.

It isn't this supposed wealth but growing poverty that has Italians upset these days. And it isn't the lives of the rich that shape the headlines, but the fates of people like Anna Maria Sopranzi, 68, and Romeo Dionisi, 62. Dionisi was a self-employed craftsman from Civitanova Marche in central Italy.

Sopranzi and Dionisi hung themselves from a heating pipe in their basement. A farewell note was stuck to the windshield of their neighbor's car. "Forgive us," they had written. Deeply in debt and impoverished, they had had no income for months but plenty of delinquent customers. Right up until the end, they hadn't shown any signs of despair or asked for help, neither from relatives nor the church.

They died of shame, and of the burden of the demands imposed by Equitalia, a government-owned company that collects taxes for the tax authorities.

People commit suicide every day in Italy. This was also the case before the crisis, but the deaths of Sopranzi and Dionisi were suicides committed out of despair, a warning sign that shook the entire country. The newly elected president of the parliament, Laura Boldrini, a former spokeswoman for the United Nations High Commissioner for Refugees, attended the funeral. "This is government murder," people said in the church. "To you we are just numbers." The archbishop appealed to politicians, saying: "It must become clear to you that we can no longer manage."

The crisis has plunged many people into poverty in Southern Europe, people who no longer know how they will make ends meet. Unemployment has risen to record level, and there are no new jobs in sight.

In Spain, a third of residents have taken out mortgages on their homes. With more than 4 million people losing their jobs in the years of crisis since 2007, many have been unable to continue servicing their loans with banks and savings banks.

There were 30,000 foreclosures last year alone, and most of them were primary residences. In most cases, the downgraded price paid at auction isn't sufficient to cover the entire outstanding debt, so that the mortgage holder is forced to continue paying high penalty interest and pay off the remaining debt in installments.

...Southern Europeans in a number of countries have traditionally paid no taxes on a good share of their income, which is one reason households with far smaller incomes have been able to accumulate substantially larger assets than German households.

Estimates by Friedrich Schneider, an economist in the Austrian city of Linz, reveal how horrifying the scope of the shadow economy is in the crisis-ridden countries of the euro zone. Among all the countries in the Organization for Economic Cooperation and Development (OECD), Greece, Italy, Portugal and Spain occupy the first four positions in the applicable negative ranking.

On the Iberian Peninsula and in Italy, the hidden economy makes up 20 percent of GDP, compared with almost 25 percent in Greece. By comparison, it only constitutes about 13 percent in Germany, and significantly less than 10 percent in other euro countries, like Austria and the Netherlands.

The greater the importance of moonlighting, the lower the tax revenues. The shadow economy deprives Spain, Italy and other countries of dozens of billions of euros in tax revenue each year, and has been doing so for decades.

Schneider's figures also show that in Greece, Spain and Portugal, the shadow economy plays an even greater role today than it did in the late 1980s. The scope of the shadow economy has declined in Italy, but only slightly. In other words, if attitudes toward taxation in Southern Europe were just as good as they are in the north, the debt-ridden countries would have solved their budget problems long ago.

All problems aside, Lars Feld, a member of the German Council of Economic Experts, also sees the ECB figures as good news. "They show that Germany, with its tough conditions for the euro bailout funds, is in the right."

After all, the debt-ridden countries are only eligible for the billions from bailout funds if they satisfy certain conditions in return. In addition to spending cuts and tax increases, they generally include the obligation to actually collect taxes. If tax laws not only appear on paper, but are also enforced, then "even Greece will be able to set aside doubts concerning the sustainability of its debts," says Feld.

Despite the drawbacks and qualifications of the ECB's wealth figures, one realization remains: The countries of the south are far more prosperous than previously supposed.

For these countries' governments and the politicians in the partner countries dealing with bailouts, this can only lead to one conclusion: There is still plenty to be had. Cash-strapped countries that have already taken advantage of aid from the bailout funds should be required to increase their own contribution even further.

In fact, the ailing economies have already begun increasing taxes on their citizens, in some cases substantially. In this context, many governments are also taking aim at assets.

Last year, for example, Spain reintroduced a wealth tax that had been abolished five years earlier. It doesn't generate much in revenues, in fact, less than €1 billion. This is because of generous exemptions that can reach €1 million on properties used as primary residences.

The Socialist government in France introduced a special tax on assets last year, which generated €2.3 billion in revenues. The Greek government plans to tax the rich to an even greater extent. After the government drastically increased revenue goals for the wealth tax last year, it now expects revenues to increase from €1.2 billion to €2.7 billion.

Economist Labrianidis also favors requiring the wealthy to play a stronger role in repaying the government debt. "The biggest problem is tax evasion and tax flight. And I'm not talking about the kiosk owner who doesn't give you a receipt for a pack of cigarettes," says the professor. He is referring to "the very rich," and he is calling for political will and a "wealth registry." Still, Labrianidis sees "no steps being taken in this direction. There is no political will to chase capital."

The average wealth of Greek households may seem high, but the country ranks near the bottom in Europe in terms of tax revenues. In 2011, tax revenues, including social security contributions, amounted to 35 percent of GDP, compared with an EU average of 40 percent.

Greek authorities are also making very little headway in their fight against tax evasion. Lists exist of delinquent doctors, wealthy people unwilling to pay their taxes and tax fugitives in Switzerland. There are also lists of undeclared swimming pools (which are subject to a tax) and proud owners of luxury yachts whose incomes are barely large enough to pay taxes. But the tax collectors continue to come up short. Last year, tax authorities were expected to drum up €2 billion in back taxes to help pay off the country's debt, at least under the conditions imposed by the troika consisting of the International Monetary Fund (IMF), the ECB and the European Commission. The actual figure was barely €1.1 billion.

In all southern European countries, the rich show little inclination to help pay for the consequences of the crisis. One exception is Diego Della Valle, 59, the inventor of the driving shoe and the president and CEO of Italian leather goods company Tod's. He proposes that companies like his, which are doing well despite the crisis, invest 1 percent of their profits to help the weakest members of society: the local elderly and unemployed youth.

In the case of Tod's, that would amount to €1.5 million, and if other profitable, publicly traded companies follow suit, he hopes to raise €150 million. Della Valle, who plans to launch his voluntary welfare contribution campaign this week, notes that this is something he can afford, and that for him it is "no great sacrifice, nor is it populism."

As nice as that may sound, keeping the government's hands away from private assets is a very popular pastime in Italy. It's an approach embodied by Silvio Berlusconi. More than anyone else, the self-made billionaire and longstanding former prime minister personifies the notion of circumventing the law and living according to the motto: Taking is more sacred than giving.

Although Italy has a high income tax rate of up to 43 percent, the government loses an estimated €120 billion a year to tax evasion and tax flight. There have long been discussions of tax increases and capital levies, but as is so often the case, little has ever been implemented.

Some ideas that have been discussed are the reintroduction of the land tax, an increase in the value-added tax and a wealth tax. The IMU, a tax on real estate ownership, including primary residences, was finally introduced under former Prime Minister Mario Monti. His predecessor Berlusconi had pledged, if re-elected, to reimburse around €4 billion in money that had been paid under the IMU tax. There was also a levy on yachts 10 meters or longer.

...Spain is a little further along in this respect. The conservative government of Prime Minister Mariano Rajoy, which came into office in December 2011, felt compelled to increase the maximum income tax rate from 45 to 52 percent. Rajoy also limited the possibility of reducing corporate income tax with write-offs. Before, on average, companies paid a de facto rate of only 10 percent to the government, says Josep Oliver i Alonso, a professor of applied economics at the Autonomous University of Barcelona

. Rajoy also reinstated the inheritance tax abolished by the Socialists, which will now apply to medium-sized and large estates. But because the crisis-torn population is already suffering under the increased value-added tax of 21 percent, as well as prescription fees and increases in taxes on alcohol and tobacco, Spaniards are growing less tolerant of the rich who try to avoid paying taxes on their money. New scandals are uncovered almost daily.

A former treasurer with the governing party, the conservative People's Party, hid €38 million in Swiss bank accounts, while a son of the former head of the Catalan government reportedly moved €32 million to tax havens. Even the son-in-law of the Spanish king allegedly siphoned ill-gotten public funds abroad.

...Peter Bofinger, a member of the German Council of Economic Experts, which advises the federal government, also believes that the crisis-ridden countries should ask the wealthy to make a substantially larger contribution. To clean up government finances, he is even calling for a capital levy. "The rich would then, for example, be required to relinquish a portion of their assets within 10 years."

A model of this sort of capital levy is the so-called Equalization of Burdens program implemented in Germany after World War II. At the time, the wealthy were compelled to pay a special tax for a period of 30 years.

Bofinger is convinced that a wealth tax would be far more appropriate than imposing a levy on savers, as was recently the case in Cyprus. "Resourceful wealthy people from Southern Europe will simply move their money to banks in Northern Europe, thereby evading the levy."

For Brussels economist Wolff, the ECB statistics provide more than just an answer to the question of who should pay the bill for the crisis in Southern Europe. "It becomes clear, once again, how unfair wealth is distributed, in Germany and elsewhere."

What he means is that wealthy Germans should also be expected to cover the costs of the crisis. "The effort to rescue the euro would be completely absurd if, in the end, the relatively poor average German household helped the super-rich in Greece avoid paying higher taxes."

Sounds like Paul Ryan and Silvio Berlusconi have substituted the same childish Ayn Rand books for the Bible on their bedside tables. Or are greed and selfishness just part of the inherent nature of conservatism?

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