Germany fires pre-G20 broadside at US criticism

24th June 2010, Comments 0 comments

Germany launched a media blitz on Thursday to defend its disputed austerity plans, the latest salvo in a transatlantic war of words ahead of a key G20 summit to discuss responses to the financial crisis.

Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble chose English-language papers for the broadside against US fears that Germany's savings programme could throttle a stuttering global recovery.

"Governments should not become addicted to borrowing as a quick fix to stimulate demand," wrote Schaeuble in the Financial Times.

"Deficit spending cannot become a permanent state of affairs," he added.

Merkel also defended her plans for more than 80 billion euros (98 billion dollars) in savings over the next four years, in an interview with the Wall Street Journal, saying her country was pulling its weight towards a rebound.

"Germany has contributed a lot to overcoming the global and economic crisis in the last couple of years," she said.

"The International Monetary Fund acknowledges this by estimating the volume of German stimulus measures in 2010 at over two percent of our GDP. That's more than in many other countries."

Ahead of the G8 and G20 meetings in Canada beginning Friday, US President Barack Obama wrote a letter to fellow world leaders that was widely seen in Germany as a swipe at Merkel's austerity policies.

"We must be flexible in adjusting the pace of consolidation and learn from the consequential mistakes of the past when stimulus was too quickly withdrawn and resulted in renewed economic hardships and recession," wrote Obama.

Finance legend George Soros, born in Hungary but resident for decades in the United States, also issued a withering attack on what he has termed "dangerous" German economic policy in the run-up to the meeting.

"By insisting on pro-cyclical policies, Germany is endangering the European Union. I realise that this is a grave accusation but I am afraid it is justified," he said in a speech in Berlin.

Market analysts said that discord between Washington and Europe -- with Berlin at the fore -- meant a meaningful coordination of so-called exit strategies from the crisis was unlikely at the summit.

"The US administration is concerned that a premature tightening of fiscal policy might ... stifle the still fragile economic recovery," Commerzbank analysts wrote in a research note Thursday.

"The Europeans on the other hand consider that the end of the fiscal policy line has been reached. The US demands are therefore disregarding the realities in Europe.

"The double summit is therefore unlikely to lead to a notable coordination of economic policies of the countries involved," they concluded.

But Merkel, whose second term, less than a year old, has been marred by internal squabbling and plunging poll ratings, was at least able to count on support from much of the German press in the spat.

In an editorial entitled: "The summit of lies", the Tagesspiegel daily wrote: "The G8 and the G20 are making a pretence of unity. Germany is standing apart -- and rightly so."

"The current economic indicators are backing her (Merkel) up: stable prices, relatively low unemployment, more growth, good consumer and business confidence," the paper wrote.

"It would be absolutely wrong for Germany to finance billions more in giveaways on the slate."

© 2010 AFP

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