The 'Rest' of the Pension Supplement Story

One key feature of the weekend deal by the CDU-CSU and SPD parties....was how the 1.5-billion Euro for the cost of this supplement for pensions would occur.  In the news for Monday....most all news groups left this out of their stories.

My German wife had a curiosity about this side of the story.  So after reading through numerous pieces, she finally came to the method to find this 1.5-billion Euro in the budget pot.  It was another tax.....which isn't on the books, nor has it been voted upon.

Back in the 2017 election period....the SPD Party came up and spoke to this fantastic way of a new taxation....financial transactions.  Those 'rich' people who buy and sell stock stock and bonds....would pay a tax each time this was accomplished.  No one ever said the end-result, and you kinda figured that must not be very much.....just enough to 'stir the pot'.

After the 2017 election, and upon the partnering process....the CDU-CSU folks frankly told the SPD.....no, this financial transaction tax wasn't going to be a piece of reality.  The thing is....by this point, the Greens and Linke Party also liked the idea. 

I sat and looked over the concept, and in two minutes.....I asked the question, this tax only works, if you buy via a German investment house (like the Frankfurt Borse).  If I took my money and went to Vienna, Paris, Amsterdam, or Warsaw....I could walk into their investment house, and buy stock or bonds (non-German of course), and avoid the tax.  This is precisely what the CDU-CSU folks talked at length about. 

So in the early months of 2018, as the coalition talks progressed....the SPD came to realize the key problem with this, and said that they'd press the EU to make this across all of Europe.  In the months since that point, no one in the EU has said much.  My humble guess is that a number of European countries really don't like this idea very much.  But there is belief that something will happen.

As you look at the pension supplement business....NONE of this will occur until you get into 2021 (odd how it's a promise but so far off).  The possibility that the EU will pass legislation by that point?  It's an unknown thing.

For the little investor....the guy holding 100,000 Euro in his portfolio.....this tax idea may not amount to much.  For the guy who holds 300-million Euro of stock and trades at least 300 times a year?  Yeah, it might amount to a couple million easily. 

You then come to the final question....what happens in 2021 if the financial transaction tax has not been fixed by the EU and mandated across all of the European members?  My guess is that the SPD will get it passed....one way or another, and you see Frankfurt investors drop out of the trade scene there. 

It's a silly situation to discuss or imagine as a national strategy to cover the cost of repairing the marginalized pension program, but hey....this is the Merkel coalition, and they resolve all problems....one way or another (even if it creates another problem in the process).