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Merkel refutes Obama on G20 fiscal policy

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Merkel refutes Obama on G20 fiscal policy
Photo: DPA
15:26 CEST+02:00
German Chancellor Angela Merkel directly contradicted US President Barack Obama on Saturday, saying spending cutbacks were now needed following the spate of throwing money at the global economic crisis.

Referring to the G20 summit in Canada next weekend, Merkel said in a videotaped message that "we are going to discuss when to quit the phase of short-term measures and go on to lasting budget consolidation."

Such a move was "urgently necessary, in the view of the Europeans and particularly of Germany," she said.

Obama urged the world's leading economies Friday to avoid scaling back government spending too quickly or risk derailing the global recovery.

"We worked exceptionally hard to restore growth; we cannot falter or lose strength now," Obama said in a letter to G20 leaders ahead of a June 26-27 summit in Toronto.

"Our highest priority in Toronto must be to safeguard and strengthen the recovery," Obama said in the letter dated June 16, but released Friday amid concerns about the pace of the global recovery.

The warning - a clear shot at European governments reining in budget deficits - comes after months of worry about the health of the eurozone, fuelled by huge public debts in Greece and Spain.

Germany, Europe's biggest economy, is working on a multi-billion-euro package of spending cuts worth designed to bolster government finances and recoup market confidence.

But those moves have led to US concerns that the global recovery - from the worst slowdown in decades - might be stopped in its tracks by withdrawing

government stimulus.

Obama also expressed concern about "weak private sector demand and continued heavy reliance on exports" by some nations within the G20, in a clear reference to Germany.

Merkel retorted Saturday, "We know of course that the European Union must make its contribution to ensure lasting world economic growth," but added, "We believe we have put the stresses on the right spot."

"Europe will make its point of view clear at the G20," she warned.

She also said that the European Union would "pledge at the G20 to develop a worldwide tax on financial transactions," even though there were doubts about

its feasibility.

"There will certainly be controversy," she added.

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