Bailout Paradox: Who Earns More Than Germans? Italians, Spaniards...And Cypriots Too

A new report finds that southern European households have higher net household income than places like Germany, which is shelling out euro bailout cash. Things must change.

A surprisingly sweet crisis for some...
A surprisingly sweet crisis for some...
Alexander Hagelüken


MUNICH - These numbers are sure to get German taxpayers fuming.

As they continue to pump hundreds of billions of euros into the crisis-riddled south of Europe, they only now find out that the Spaniards and the Italians turn out to be much wealthier than them!

What until now had only been estimates and hearsay has just gotten a lot more concrete: according to a new study by European central banks, households in Spain and Italy have on average, net – that is, after taxes have been deducted – several tens of thousands of euros more than German households.

Even the Cypriots are richer than the Germans...

So what does that mean? Stop the bailouts? No. But honest debate is necessary about who should be paying for what in the monetary union. Honest debate means: no foaming at the mouth for Germans -- and southern Europeans need to stop all the weaseling around.

Many profited hugely from the creation of the monetary union in 1999 -- for example, residents of what are today the crisis states where micro-interest-rates unleashed a construction boom and salaries ballooned exaggeratedly high. In the case of Germany, it was an export boom. And now many are suffering from the euro rollercoaster ride: workers and pensioners in the crisis states, taxpayers in the countries dishing out the aid – and depositors everywhere, because the banks have to keep interest rates low.

This brief list shows how unevenly profits and costs are divided around the single monetary union. The wealthy, who in economically good times usually profit disproportionately, are bearing too little of the burden.

That applies to the wealthy in the helping countries, although bailouts have been mostly footed by taxpayers -- which is to say nearly all citizens. But only seldom is it mainly the wealthy who foot the bill, and yet they are the ones who will have benefitted most from the interest boom in southern Europe or the export boom in Germany: they’re the ones holding the shares in financial entities and companies.

But things are even more uneven if one considers how little of the burden the wealthy in southern Europe have shouldered. Of course they too are hit by the recession in the crisis nations. However they are far less burdened than the workers and pensioners in their countries, or northern European taxpayers. Consider that 1.4 million millionaires live in Italy, nearly 400,000 more than in larger (and supposedly economically healthier) Germany.

Italy enjoyed a major economic upturn from the security the euro gave its formerly chaotic economy. But that’s not all: Italy – like other crisis nations – goes easy on taxes for its high earners, much easier than Germany. And the Italian political class often has a vested interest in keeping things that way, since they often benefit from low taxation rates, as the example of Silvio Berlusconi amply illustrates.

Get tough on tax evasion

But now the time has come when the monetary union is no longer producing wins the way it did at the outset: it’s producing high costs – the cost of its own rescue. And it’s the moment for the burdens to finally be distributed more fairly. Those who were raking it in in the early years (and who, once the crisis is over, will be doing so again) must pay more than middle-class workers and taxpayers. Take from the rich, particularly in the south!

Raising taxes, and seriously going after unpaid taxes in Italy and Greece, would be only a first step. Europe’s governments should be giving serious thought to other ways the rich in the crisis states can be brought into sharing the burden of rescuing the euro. Private wealth amounting to 11 trillion euros in Italy and Spain alone (as compared to Germany’s 8 trillion) speaks for itself – tapping into some of that would go a long way to ease things up for average earners across Europe. Of course it would also be imperative for the EU countries to put an end to what is sometimes downright nonsensical tax competition and become more cooperative with one another with regard to tax evaders.

In the process of getting the rich to share more of the burden, it has to be recognized that the substance of some assets like real estate or businesses is not easily taxable. But we should make it clear that sacrifices will have to be made by workers and pensioners in crisis states, because these countries need to strengthen their competitiveness -- and that means lower salaries and social spending.

Yes, all of these factors must be taken into account, but the bottom line remains: Europe has to put more of the burden on the rich to make the crisis more bearable for the rest of Europeans.

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Air Next: How A Crypto Scam Collapsed On A Single Spelling Mistake

It is today a proven fraud, nailed by the French stock market watchdog: Air Next resorted to a full range of dubious practices to raise money but the simplest of errors exposed the scam and limited the damage to investors.

Sky is the crypto limit

Laurence Boisseau

PARIS — Air Next promised to use blockchain technology to revolutionize passenger transport. Should we have read something into its name? In fact, the company was talking a lot of hot air from the start. Air Next turned out to be a scam, with a fake website, false identities, fake criminal records, counterfeited bank certificates, aggressive marketing … real crooks. Thirty-five employees recruited over the summer ranked among its victims, not to mention the few investors who put money in the business.

Maud (not her real name) had always dreamed of working in a start-up. In July, she spotted an ad on Linkedin and was interviewed by videoconference — hardly unusual in the era of COVID and teleworking. She was hired very quickly and signed a permanent work contract. She resigned from her old job, happy to get started on a new adventure.

Others like Maud fell for the bait. At least ten senior managers, coming from major airlines, airports, large French and American corporations, a former police officer … all firmly believed in this project. Some quit their jobs to join; some French expats even made their way back to France.

Share capital of one billion 

The story began last February, when Air Next registered with the Paris Commercial Court. The new company stated it was developing an application that would allow the purchase of airline tickets by using cryptocurrency, at unbeatable prices and with an automatic guarantee in case of cancellation or delay, via a "smart contract" system (a computer protocol that facilitates, verifies and oversees the handling of a contract).

The firm declared a share capital of one billion euros, with offices under construction at 50, Avenue des Champs Elysées, and a president, Philippe Vincent ... which was probably a usurped identity.

Last summer, Air Next started recruiting. The company also wanted to raise money to have the assets on hand to allow passenger compensation. It organized a fundraiser using an ICO, or "Initial Coin Offering", via the issuance of digital tokens, transacted in cryptocurrencies through the blockchain.

While nothing obliged him to do so, the company owner went as far as setting up a file with the AMF, France's stock market regulator which oversees this type of transaction. Seeking the market regulator stamp is optional, but when issued, it gives guarantees to those buying tokens.

screenshot of the typo that revealed the Air Next scam

The infamous typo that brought the Air Next scam down

compta online

Raising Initial Coin Offering 

Then, on Sept. 30, the AMF issued an alert, by way of a press release, on the risks of fraud associated with the ICO, as it suspected some documents to be forgeries. A few hours before that, Air Next had just brought forward by several days the date of its tokens pre-sale.

For employees of the new company, it was a brutal wake-up call. They quickly understood that they had been duped, that they'd bet on the proverbial house of cards. On the investor side, the CEO didn't get beyond an initial fundraising of 150,000 euros. He was hoping to raise millions, but despite his failure, he didn't lose confidence. Challenged by one of his employees on Telegram, he admitted that "many documents provided were false", that "an error cost the life of this project."

What was the "error" he was referring to? A typo in the name of the would-be bank backing the startup. A very small one, at the bottom of the page of the false bank certificate, where the name "Edmond de Rothschild" is misspelled "Edemond".

Finding culprits 

Before the AMF's public alert, websites specializing in crypto-assets had already noted certain inconsistencies. The company had declared a share capital of 1 billion euros, which is an enormous amount. Air Next's CEO also boasted about having discovered bitcoin at a time when only a few geeks knew about cryptocurrency.

Employees and investors filed a complaint. Failing to find the general manager, Julien Leclerc — which might also be a fake name — they started looking for other culprits. They believe that if the Paris Commercial Court hadn't registered the company, no one would have been defrauded.

Beyond the handful of victims, this case is a plea for the implementation of more secure procedures, in an increasingly digital world, particularly following the pandemic. The much touted ICO market is itself a victim, and may find it hard to recover.

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