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Germany’s ‘five-wise men’ want a Wealth tax to fund EU bailouts

Following on from the Cypriot bailout which saw depositors foot the bill the possibility of a wealth tax has taken another step closer. This time a German council comprised of economic experts nicknamed ‘the five wise men’ has suggested that wealthy households should pay towards the cost of any future bail-outs for the weaker members of the Eurozone.

The German suggestion is the latest sign that Berlin is intent on imposing even tougher rules on weaker southern euro members in exchange for using its economic might to support their finances. As well as inflaming tensions between Germany and its smaller southern partners, the suggestion could also mean that Britons with holiday homes are dragged deeper into the Eurozone crisis.

Some senior German officials have begun to argue that richer home owners in countries like Portugal and Spain have so far avoided paying their fair share to rescue the flawed Euro and left Germany paying more that it should have to.

Prof Peter Bofinger, an adviser to Mrs Merkel, said that levies on bank accounts are the wrong way of funding bail-outs, because rich people are able to shift their money out of the country.

“The resourceful rich just move their money to banks in northern Europe and avoid paying,” Prof Bofinger told Der Spiegel, a German magazine. Instead of taxing cash, European Union governments should in future target property and other, less mobile assets, he said. For example, over the next 10 years, the rich should give up a portion of their assets.”

According to a European Central Bank study the median wealth in the struggling nations reportedly shows that people in those crisis hit areas are richer than the Germans.

Alternative für Deutschland, a German euro sceptic party, is putting Mrs Merkel under increasing pressure in her response to the Eurozone’s prolonged crisis.

Many members of the new party, which held its first conference on Sunday, want Germany to pull out of the euro and revert to the Deutschmark.

The Eurozone saw its trade surplus grow in February according to the European statistics agency. Normally a surplus is regarded as a good thing but in this case it in fact reveals the continuing weakness in the single currency region.

The positive balance rose from €8.7 billion in January to €12 billion in February a figure that was supported not by a big improvement in exports but by the continuing low demand for imports, a sign that domestic demand remains weak and highlights the difficulties faced by the Euro bloc to create demand and growth.

The value of goods imported by the Eurozone decreased by 7% on a year by year basis, exports showed a slight improvement as exports in goods such as chemicals and cars rose during the same period, posting a 2.6 billion Euro on a year by year basis.

As of 12:00 pm GMT

The Euro to Pound Sterling exchange rate is currently trading in the region of 0.8531

The Euro to US Dollar exchange rate is currently trading in the region of 1.3076

The Euro to Australian Dollar exchange rate is currently trading in the region of 1.2564

The Euro to New Zealand Dollar exchange rate is currently trading in the region of 1.5427