When I posted my comment on exceedingly harsh taxation, the Captain emailed me back with a note mildly chastising me for calling him "lucky" to be living in a low-tax country, quoting the Jeffersonian adage that people get the governments they deserve. I certainly agree that this holds water in many parts of the world, and especially in Europe. On the other hand there are some regimes that nobody deserves, such as the harsher despotisms of the Arab world.

However, in most European countries there are elections, and people do get a say in who they want to be governed by. Like the Germans, who went to the polls last week and made their choice. And they are certainly getting the rewards they deserve: tax hikes! In the negotiations about putting together a new government, both the Greens and the SPD have wasted no time in ditching their election rhetoric and are now calling for hefty tax rises. They've already agreed on raising further the so-called "eco-tax," which is a tax levied on energy. Since energy input is a rather essential part of economic activity, this measure alone will hit the already punch-drunk German economy pretty hard. Then there are calls to abolish tax breaks for married couples, "to fund child care." Ah, wonderful lofty goals for yet more government involvement in your private affairs. The government is of course well-known for its efficient and well-run services, so expanding government interference must be a good thing. After all, there are several areas of private life in which the government has virtually no say, and that could be dangerous. You don't want people left to their own devices.

Ah, but that's not all. The prime ministers of the states of Lower Saxony and Rhineland Palatinate are now calling for the introduction of a wealth tax and for higher estate taxes. This for yet another lofty goal, to wit a new "Pact between Generations" to fund better education. And then there's the ever popular sin taxes, which health minister Ulla Schmidt wants to raise to fund health care.

Finally, should by some weird accident there be any entrepreneurial spirit left, the new government is already floating ideas for the coup de grace. They want to undo one of the few things they did get right in the last four years, which is lower taxation on capital gains for companies. This is essential in order to unwind the German equivalent of the Japanese keiretsu system, in which companies have large cross-shareholdings. Especially stultifying are the holdings of banks in their clients. Not only does this affect capital market transparency, it also degrades overall efficiency of the capital allocation process. Many companies do want to unwind their cross-shareholdings, but the punitive tax rates (I think it was 60%) made it very unattractive. In the previous tax reform, these rates were cut. Now they want to undo this as well.

If you have a job, you get taxed on your income. If you have any income left, you buy things, and end up paying 16% Value Added Tax, so more of your income goes to the state. Then if you buy gas, you get hit with a gas tax. But perhaps you are lucky enough to have some savings. Those are taxed too of course. And your investments get taxed as well. Add a new wealth tax on top of that (you mean there would be anybody wealthy after all this?), and chances are that your total net worth is not going be growing very quickly. But let's assume that by some miracle you manage to have some money left by the time you die. At that point, the money gets taxed for a fifth time to prevent you from leaving the fruits of your labor to your children.

In my post-election analysis I predicted more stagnation for the German economy. I think I was too optimistic. If all of this really goes through, the German economy is going to spiral downward once again. The big ominous example that seldom dare speak its name is Japan. For more than a decade now, Japan has been in the grips of a vicious deflationary spiral, and the country is heading for medium-term bankruptcy if no dramatic measures are taken soon. Japan tried to spend its way out of trouble. Germany is trying to tax its way out of trouble (well, Japan tried that too at various times during the last ten years). It has not worked. It will not work. And that's not even touching on the issue of demographics, which exacerbates the situation in both Japan and Germany.

Although I can't resist a small post-election gloat at the horrible misfortune that is now descending like a dark noxious cloud on Germany, the miasma that is wafting over from Holland's eastern border is not a good thing. If any major world economy, which Germany still is, ends up in so much trouble, it has ramifications throughout the world trading system. But it will also put increased pressure on the euro and the entire structure of the European Union, which is already creaking.

This could get ugly. And that's not going to be good for anybody on the European continent.