Thursday, Nov 27, 2008
Angela Merkel, the German chancellor, turned the tables on her international critics on Wednesday by accusing the US and other governments of making “cheap money” a central tool of their economic management, thus planting the seeds of a similar crisis in five years.
“Excessively cheap money in the US was a driver of today’s crisis,” she told the German parliament. “I am deeply concerned about whether we are now reinforcing this trend through measures being adopted in the US and elsewhere and whether we could find ourselves in five years facing the exact same crisis.”
There have been calls from outside Germany for it to beef up fiscal support, but Ms Merkel has been wary of raising public borrowing to stimulate demand, fearing that the extra income could boost Germans’ savings rate, which is already high.
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The chancellor defended her government’s modest fiscal stimulus – worth €12bn over the next two years – as a “measured and proportional response?.?.?.?tailored to the situation”.
Ms Merkel’s comments came as the European Union proposed a €200bn economic stimulus plan aimed at avoiding a deeper recession through tax and infrastructure plans. There were immediate doubts as to whether member states would back the measures.
The proposals envisage the EU’s 27 states contributing about €170bn with the European Commission and the European Investment Bank providing the remaining €30bn, partly through accelerated spending programmes.
This article was posted: Thursday, November 27, 2008 at 11:34 am