IMF: 'Increase public spending and tax the rich'

If it were up to the IMF, Germany should do more to tackle income inequality, for example through wealth heavier load and to increase wages. Government spending must also be increased, for example through investments in infrastructure and a reduction in social security contributions.

The IMF thinks that these measures can give the German economy a strong boost, but Chancellor Merkel's government is reluctant to do so. According to Finance Minister Wolfgang Schäuble, income inequality in Germany has not increased over the past decade and the country is not out of step with other countries in terms of income distribution.

Wealth tax?

The IMF wonders why Germany is not doing more to reduce wealth inequality and is therefore proposing to increase the wealth tax. According to Martin Armstrong the IMF still stands by its Previous recommendation to create a one-off saver levy of 10%.

It is striking to see how the IMF tries to lecture different countries when it comes to fiscal policy. In recent years, Germany has managed to put its budget in order, in order to set a good example to other European countries. This is rewarded by investors, who are willing to lend money to the German government at historically low interest rates.

Welfare state

If it were up to the IMF, Germany would have to increase its public spending again and expand the size of the state at the expense of the private market. What the Germans themselves think of this will become clear later this year, when elections are also held in Germany. Will Merkel's hard line continue or will there be a more socialist policy that will indeed increase wealth taxes?

Worldwide, we see that governments are getting bigger and more powerful. That means they also need more resources to sustain the growing welfare state . High-net-worth individuals may be wise to convert some of their wealth into tangible assets that can be traded outside the financial system, should the tax environment change in the future.

Gold and cash are tools for storing wealth outside the financial system (Image via Pixabay)