THE GUARDIAN 20.3.09
Gordon Brown's plan for recovery rejected by Germany
. Ian Traynor and David Gow in Brussels
Angela Merkel, the German chancellor, yesterday opened up a new rift
with Britain and the United States ahead of the G20 summit in London
when she delivered a blunt rejection of extra fiscal stimulus
packages as advocated by Gordon Brown and the Obama administration.
As European leaders prepared to meet in Brussels to hammer out a
common position on the financial and economic crisis before the
summit in a fortnight, Merkel insisted the focus of any global
recovery plan should be on reining in the markets. "It is not time to
look at more growth measures. I disagree with this idea completely.
The existing measures must work, they must be allowed to develop,"
she said in a speech to the Bundestag.
"A competition to outdo each other with promises will not calm the
situation," she added, describing transatlantic contradictions in
response to the crisis as "very dangerous".
She said: "We need to send good psychological signals from London and
not engage in a competition for unrealisable growth packages. We have
already done our part."
But last night the EU's 27 leaders acknowledged the scale of the
crisis threatening to blow both the bloc and the 16-strong eurozone
apart when they agreed in principle to double to ?50bn £47bn) a
special EU fund to help countries in balance of payments problems.
Around ?10bn has already been committed to bailing out Hungary,
Latvia and Romania. .
The Czech premier, Mirek Topolánek, who chaired the meeting, said the
increased EU fund could be used to help rescue eurozone countries in
trouble, such as Ireland, as well as eastern European states
afflicted by soaring deficits, unemployment and mortgage defaults.
Germany claimed it had won the argument with the "Anglo-Americans"
over how to regulate and supervise the financial markets. But
differences persisted in Brussels, with No 10 insisting the
supervision of financial institutions should remain "a national
competence". France and Germany demanded "decisive steps towards a
European regulatory framework" by June.
Peer Steinbrück, Germany's finance minister, and Merkel said Europe
and the US had to reach agreement on common measures to try to stall
the slide into worse financial catastrophe. "We now have decisions
that would have been completely inconceivable a year ago," Steinbrück
told the Süddeutsche Zeitung. "Hedge funds and ratings agencies will
be put under state regulation, cross-border banks will be supervised.
The very fact that the Anglo-Americans have agreed to the principle
'no market, no actor, no product without supervision' is huge
progress." [except it isn't agreed! -cs]
Merkel and the French president, Nicolas Sarkozy, are pressing for
the EU to adopt last month's proposals from a Brussels working group
for a European supervisory body that would oversee the City of London
for the first time. But British government officials ruled out the
pan-European approach. Instead, they said the report on Wednesday
from Lord Turner, chairman of the Financial Services Authority,
should be the blueprint for EU regulation.
The Americans have been pushing for more fiscal stimulus from the
Europeans, a position tacitly supported by Brown. But last night
British officials dropped such demands, saying fiscal stimulus would
not be on the agenda at the EU meeting, which ends today.
The EU argues that combined European spending programmes amount to
?400bn and are a match for the White House's, given the different
welfare and social security systems in Europe and the US.
"The Americans are claiming they are doing a lot more," said a
European commission official. "We're telling the US, you need not
give us lectures."
German resistance to increasing the EU's stimulus package hardened as
Steinbrück admitted that economic contraction at home could be worse
than the 2.25% he has forecast - and France admitted it faced its
worst slump for 30 years, with the economy likely to decline by 3%.
Friday, 20 March 2009
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