The French and German governments chose a strange way to escape the European herd. As other major economies impose a one-time tax on energy groups and other companies, tying it to food, fuel and electricity price inflation, the eurozone’s two biggest economic powers remain clearly opposed to such measures. For their part, the UK, Italy and Spain, in different ways and from different sectors, have requested a special contribution from companies that have benefited from more expensive energy, post-pandemic recovery or higher interest rates. Paris and Berlin have different reasons to despise such initiatives. France because President Macron was re-elected in May on promises not to raise taxes. Germany because Finance Minister Christian Lindner, a liberal and free marketer, points out that the tax makes no economic sense.

Germany and France seem negative, each for different reasons.

While contingency taxes are controversial, starting with the delicate definition of what exactly constitutes “windfall”, the massive costs that governments must incur to deal with the ongoing crisis justify such a move. These costs can be financed either through taxes or additional loans. A low-debt Germany could afford to borrow more, despite Lindner’s obsession with deficits. That would be harder to do for heavily indebted France, which seems to prefer putting pressure on companies to do the right thing – like “asking” Total Energies to cut petrol prices at gas stations. Both Christian Lindner and his French counterpart Brinot Le Maire have hinted that taxing utilities or oil companies would jeopardize their efforts to turn their countries into global investment targets. In fact, threats by industry to reduce investment in the event of such taxes should be treated with caution. The UK’s overall tax burden of around 37% of GDP remains much lower than France’s (51%) or Germany’s (47%), according to the IMF. With a major global recession looming in 2023, international investors would do well to assess whether individual government responses to the crisis will prevent a major economic collapse. Maybe start looking at how they spend money instead of how they earn it.