Merkel rebuffs calls for more German spending

24th June 2010, Comments 0 comments

German Chancellor Angela Merkel rejected on Thursday a call by US President Barack Obama and others to boost spending and rely less on exports, saying less competition would not aid a global recovery.

"German export successes reflect the high competitiveness and innovation strength of our companies," Merkel told the Wall Street Journal in an interview.

"Artificially reducing Germany's competitiveness would be of no use to anyone," she added.

Obama and some European leaders have pressed China, Germany and Japan to strike a balance between their export-led economies and consumption-driven models like that of the United States.

Merkel and her finance minister, Wolfgang Schaeuble, launched a media blitz to defend Germany's trade surpluses ahead of Group of Eight and Group of 20 meetings on Friday and Saturday in Toronto.

Schaeuble told the Financial Times and Handelsblatt newspapers: "Governments should not become addicted to borrowing as a quick fix to stimulate demand.

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

Governments borrowed heavily to battle the great recession of 2008-2009 and are now being forced by financial markets to get their finances in order.

Merkel had already rebuffed calls for more German spending early this week.

She said in an interview with the ARD television station that she had made clear to Obama "that Germany will do much more for the recovery of the world economy in 2010 than average."

But Berlin could find itself isolated among the Group of 20 advanced and developing economies, and fail to win support for measures it wants, such as greater regulation of financial markets.

Merkel called in her Wall Street Journal interview for the G20 to send a signal to markets that tougher regulations were on the way, but also said governments must back up banks if so-called stress tests to be published next month showed some banks were in trouble.

"More transparency can restore trust" in banks, Merkel said. "But building trust will only work if every country also shows how it will handle the results, for example by recapitalising its banks if necessary."

© 2010 AFP

0 Comments To This Article