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Merkel backs EU stimulus measures

AFP/The Local · 11 Dec 2008, 21:36

Published: 11 Dec 2008 21:36 GMT+01:00

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"We support the European Commission's initiative which says that member states must contribute up to 1.5 percent" of gross domestic product, she said as she arrived at the two-day summit.

With the spectre of recession looming large, the European Commission wants heads of state and government to sign up to its proposed plans at the summit to pump €200 billion ($260 billion) into the European economy.

The plan, based on a series of national measures worth €170 billion and EU programmes, would ramp up public investment across Europe and allow for some taxes to be eased. Germany, Europe's biggest economic power, has faced calls in the run-up to the summit to contribute as much as possible to the European package.

German Finance Minister Peer Steinbrück, who has made strides in improving Germany's public finances, is loath to spend any more than is necessary to get the German economy moving again.

Steinbrück this week also launched a highly unusual attack on Britain's economic stimulus package, saying it will not fend off recession but will leave the next generation saddled with debt.

In an interview with Newsweek magazine, excerpts of which were published Wednesday, Steinbrück said the British government's switch from financial prudence to heavy borrowing was "breathtaking" and "crass Keynesianism."

But Merkel reached out to her EU partners, hinting that Berlin was prepared to make a bigger contribution to the package.

"Germany is aware of its responsibility as a large economy and we are going to consider what we can still do especially in light of the American (stimulus) measures that will come in January with the new president," she said.

EU leaders are meeting Thursday and Friday to put the final touches on economic stimulus plans. France, which holds the EU presidency, and Britain have united in a push for an extensive stimulus package.

But Germany, one of the few EU countries heading into the downturn with strong public finances, has been fighting off pressure to make a bigger effort to boost the European economy, insisting instead on a national strategy determined at its own pace.

The divergences erupted Monday when Brown, French President Nicolas Sarkozy and European Commission chief Jose Manuel Barroso met without Germany's Angela Merkel in London.

Although Merkel's spokesman repeatedly denied the chancellor was piqued, Foreign Minister Frank-Walter Steinmeier slammed what he said was an attempt to freeze out Berlin. "I don't think it's good that the three (leaders) are meeting alone and that the chancellor is not there," Steinmeier said.

Steinbrück and Steinmeier, known as the Stones because their names share the word in German, are both from the Social Democratic Party, the beleaguered junior partner in Merkel's "grand coalition."

Ulrike Guerot, director of the Berlin office of the European Council on Foreign Relations, said domestic politics was shaping Germany's role in the European debate with just 10 months to go before a general election.

She said its influence could be seen not only in how Germany grapples with a recession that economists say could become the worst since World War II, but also in how Merkel has appeared to step back from climate protection targets she secured during her own EU presidency last year.

"Merkel has a problem because the economic crisis is having a financial impact on her climate plans, so she is under pressure domestically," Guerot told AFP. "She is also under enormous international pressure - you read everywhere that she has taken a go-it-alone approach."

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Merkel, who had last year championed targets to cut greenhouse gas emissions, said this week that she would fight any EU climate deal that jeopardised German jobs. Guerot said Berlin was annoyed that Sarkozy was scoring political points in Europe by "making promises to everyone. It is going to be a very, very tough summit for everybody."

Brown, for his part, replied to Steinbrück's salvo by noting that Berlin was also spending heavily to prop up its economy.

"The German government is investing more, they've just announced a fiscal expansion so that they can invest in public works, and helping their banks and doing these sort of things," Brown told LBC radio.

"I think the important thing is almost every country around the world is doing what we have been doing," in terms of supporting ailing banks and providing fiscal stimulus.

Steinbrück's spokesman issued a statement saying that the minister was simply defending Germany's decision not to lower sales tax and had no intention of offending London. "It was the furthest thing from our minds," Torsten Albig said.

AFP/The Local (news@thelocal.de)

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