Merkel defends economic policy to Obama

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Chancellor Angela Merkel Tuesday defended her economic policy ahead of a crunch G20 summit at the weekend, amid reports of a rift with US President Barack Obama over German austerity plans.

"Yesterday, during a phone call with Barack Obama, I told him how important budgetary consolidation was," Merkel said in a speech to the DIHK Chambers of Commerce and Industry.

She added she did not believe the savings measures she has announced, amounting to some 80 billion euros (98 billion dollars) from next year until 2014, "would slow down the global economy."

Last week, Obama sent a letter to other world leaders in which he said he was "concerned by weak private sector demand and continued heavy reliance on exports by some countries with already large external surpluses."

He added that governments must "learn from the consequential mistakes of the past when stimulus was too quickly withdrawn and resulted in renewed economic hardships and recession."

Many viewed this as an attack on Germany, the world's second biggest exporter after China, but Merkel said the government "can not influence the exporting power" of German firms.

German government officials were keen to play down any talk of a rift ahead of the G20 meeting in Toronto.

There was "no pressure" coming from Washington on the subject of economic policy, a government source said earlier Tuesday.

Obama and Merkel agreed on a "differentiated exit" from emergency stimulus measures put in place at the height of the financial turmoil, added the source, who did not wish to be named.

"The Obama letter showed fewer differences (between Berlin and Washington) than have been reported," the source said, adding: "We are in agreement."

© 2010 AFP

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