Merkel defends savings plan after Obama letter

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German Chancellor Angela Merkel said Monday her planned austerity measures would not harm growth, after US President Barack Obama warned scaling back spending too fast could harm the global economy.

"It is not about a radical savings programme," she said, referring to a plan that foresees 86 billion euros (107 billion dollars) in spending cuts between next year and 2014.

She said the measures were aimed at reducing Germany's structural deficit and, at the same time, fostering sustainable growth by investing in areas such as education.

"I think that when we explain this, no one will be able to say that we are not doing enough for growth," Merkel said.

In a letter to his G20 colleagues, Obama said: "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adjusting the pace of consolidation and learn from the consequential mistakes of the past when stimulus was too quickly withdrawn and resulted in renewed economic hardships and recession."

The letter, published only days before world leaders meet in Canada for a crunch meeting on the global economy, was widely seen as a dig at Germany and its savings plan.

Earlier Monday, Britain also defended drastic savings measures expected to be unveiled in an emergency budget on Tuesday.

"Different countries have different starting points and for some countries, such as our own, there is a need to get on and tackle the deficit more quickly," Prime Minister David Cameron's spokesman told reporters.

Merkel also defended Germany against accusations it was contributing to global economic imbalances due to its reliance on exports, insisting Europe as a whole should be taken into account.

"Two-thirds, or more than two-thirds, of our exports go into the European internal market. When you look at the European internal market as a whole, we have relatively balanced trade," she said.

In a videotaped message on Saturday, she insisted that budgetary consolidation was "urgently necessary" in the wake of the debt crisis in Europe.

© 2010 AFP

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