AHEAD OF the G20 summit, chancellor Angela Merkel has stepped up her demands for an international financial transaction tax and dismissed international criticism of her government’s €80 billion austerity package.
Washington has been the loudest critic of Berlin’s ambitious spending cut plans, arguing that it will strangle economic recovery in the euro zone and beyond.
“We are going to make the efforts we have promised. I don’t think we should slacken off,” said Dr Merkel of the austerity package that has yet to pass the German parliament. Her remarks followed a letter from President Barack Obama urging exporting countries such as Germany to do more to focus on domestic spending.
“I had a long telephone conversation with the American president and was very clear that Germany will contribute more to overcoming the global financial and economic crisis than many other countries,” she said.
Berlin is battling an international perception that, after traumatic experiences with inflation in the 1920s, Germany is single-mindedly interested in budget cuts.
Dr Merkel likes to cite a recent IMF study estimating German stimulus measures in 2010 at over 2 per cent of our GDP. “That’s more than in many other countries,” she told German television.
Germany’s economic ambitions are causing increasing tension in Dr Merkel’s coalition government. A rapidly improving economic situation – including €20 billion extra tax revenue this year – has lead to Dr Merkel’s coalition partner, the liberal Free Democrats (FDP) to renew its call for tax cuts.
