Finance Minister Wolfgang Schaeuble hatched a plan to siphon off a huge chunk of sovereign debt for every country in the EU and pretend to do something about it, not now of course, but over the next 20 years.
Allegedly the siphoned off debt would be paid back via a “National Redemption Fund”.
Of course the only way to pay that debt back is by raising taxes or cutting spending for 20 years which means it has a snowball’s chance in hell of actually working.
Reuters discusses the 20-year can kicking idea in German finance minister details debt fund plan before EU summit
Wolfgang Schaeuble outlined his plans under which states would effectively siphon off a chunk of their debt to a special national fund and pay it off over about 20 years while committing to reforms to keep debt levels on target.
Schaeuble believes his proposal, which has won qualified support from Chancellor Angela Merkel, would boost confidence as states would be sending a signal they were serious about limiting debt levels to 60 percent of gross domestic product.
“We need a redemption fund in every single country of the euro zone,” Schaeuble told the Passauer Neue Presse.
“Each of these countries should put into a special fund that part of its debt which exceed 60 percent of its GDP, and should pay that off with tax revenues. Over a period of 20 years, the debt should be reduced to 60 percent,” he said.
In Germany’s case, the fund – covering federal, state and municipal debts – would amount to about 500 billion euros ($672 billion) as German debt is around 80 percent of its gross domestic product, said Schaeuble.
Merkel’s spokesman welcomed Schaeuble’s proposal as “interesting,” saying it could help rebuild investor confidence.
Just One Catch
Schaeuble’s plan has already hit opposition from Austria. Finance Minister Maria Fekter said on Friday any proposals that resulted in gathering billions of euros from taxpayers would encounter problems in national parliaments.
Duh? Ya think?
Bear in mind the idea is progressively harder for countries already under extreme difficulty with various austerity measures imposed to pay back French and German banks.
This is another one of those dead-on-arrival ideas that might even be agreed upon, but will never succeed.
Mike “Mish” Shedlock
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