Merkel sees 'fruitful, contentious' G20 deficits debate

24th June 2010, Comments 0 comments

German Chancellor Angela Merkel said Thursday she expected "fruitful" but "contentious" discussions on deficits at this week's G8 and G20 summits after criticism of Berlin over its austerity cuts.

"We, as Europeans, and in particular Germany, are of the opinion that reducing deficits is essential ... for achieving sustainable growth that we all want," Merkel told reporters in Berlin.

"I think that there will be very fruitful, but also very contentious, debates on this issue," she said.

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 aim to slash spending in Europe's top economy.

Critics have said that the more than 80 billion euros (98 billion dollars) in savings announced by Merkel over the next four years, mirroring similar efforts in other European countries like Britain, will hit growth.

But Merkel has insisted that deficits must be cut in the wake of the eurozone debt crisis that forced Berlin to provide the lion's share to a rescue mechanism in the face of fierce voters opposition and falling poll ratings.

The chancellor said agreement was unlikely to be struck on the issue of a global tax on financial market transactions and banks.

"One area we will certainly discuss is the question of how the financial sector can contribute to the costs of the crisis and to the prevention of future crises."

"Here, I do not think we will have agreement in all areas but I am very happy that we as Europeans have found a common position not only on a bank levy but also on a financial market transaction tax," she added.

France, Britain, Germany and the United States have publicly urged their G20 partners to adopt a tax, but Russia, China, India, Australia and summit hosts Canada oppose the move and no decision is expected this week.

© 2010 AFP

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