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Depardieuski

First Published on 4 January 2013

The beginning of the year is always a time for big bargains. In the January sales, those with sharp elbows will often walk away with half-price deals.

If I told you that yesterday’s mystery shopper walked away with savings of 62% that would probably sound about right for anyone prepared to wake up early enough to be first in line. If I clarify that his savings are 62% off his annual income, that detail probably sets this story in a whole new perspective.

As of yesterday, actor Gerard Depardieu will be eligible to pay a flat tax rate of only 13% having taking up citizenship in Russia. It’s ironic that one of France’s rich and famous should seek shelter from President Hollande’s punitive socialist taxes by becoming a citizen of the former Union of Soviet Socialist Republics.

The chronology of this issue has nothing to do with Depardieu. It relates to debt in the financial system. Had Depardieu remained in France to pay the intended taxes, the country would not offer better roads, better schools, better healthcare or even better social welfare. The emergency tax rate of 75% for the super-rich is for a single cause: repaying the excess debt that accumulated during a bygone era.

Many critics consider it shameful that Depardieu should escape the debt of his native France. Surely he owes it to the French people (and the local film industry that made him great) to stay and honour his responsibility. However if liability for debt was a function of where it originated, we should get the American taxpayer to pick up the bill. They created it, and they exported it to European banks - which in turn were bailed out by their underfunded national treasuries. It should come as no surprise that the toxic debt that was too much for the Republican Elephant to stomach was way too much for the Gallic Rooster to peck at. In fact even the combined European Communities have been unable to swallow it without seeing stars.

While the additional debt exposed the reckless spending of many European countries, notably Greece, debt is an issue that is too toxic to absorb in a single lifetime. The reason that it is being pinned on the wealthy is because that is the simple political choice: they have the honour and the ability to pay it, and there will be no major backlash, because most of the electorate do not consider themselves as rich.

Yet just because politicians can identify a soft target doesn’t mean that those soft targets should be obliged to remain in the cross-hairs of their fiscal guns. When those who are admired contemplate Belgian, Montenegrin and finally Russian citizenship, it brings this issue back into the average French living room.

There is only one way that all this debt can be expunged in a single generation, and that is to erode the repayment amount through inflation. Traditionally this does not favour the middle classes or the poor. The rich on the other hand have portfolios of assets, many of which will appreciate with inflation.

Neither inflation nor a persecution of the rich, however temporary, can resolve the European debt crisis. The only alternative to a lost decade is to reschedule our debt payments over a longer time horizon – and perhaps to freeze the interest payments in the meantime - so that States can offer decent roads, schools, healthcare and social welfare.

The Greek national motto is “Freedom or Death”. Until citizens are truly free of the debt burden the will be little else on offer but further civil unrest, with the possibility of death.

European countries should look to the poor and not to the rich for solutions. The over-indebted poor would be forced to go out and hock their possessions in order to make ends meet. Greece, for example, could pledge several islands and the Parthenon as security for a debt that it could promise to repay, with interest, in 2020. And in the meantime it can get on with the task of regenerating youth employment.

And as for the rich? Good deals are always out there for those willing to be first in line - you just have to have the right nose for them.