Britain appears to have victory over Germany in the diplomatic war between the two nations after it secured a unanimous deal on a Europe-wide economic rescue package.
Certain members of Germany's ruling coalition have criticised British Prime Minister's recent economic policy.
Brown claims fiscal victory over Germany as EU strikes deal on £178bn stimulus plan
By Benedict Brogan, Michael Lea and Mail Foreign Service
13th December 2008
Daily Mail
Gordon Brown claimed victory in the diplomatic row with Germany yesterday after a unanimous deal on a European-wide economic recovery package.
He seized on the support of Chancellor Angela Merkel for a £180billion fiscal stimulus as proof that she agreed with his policies of tax cuts and spending as the way out of recession.
It apparently drew a line under the clashes over using borrowing to kickstart the economy, which had marred relations between London and Berlin during a two-day EU summit.
As the Daily Mail revealed yesterday, tensions were at one point running so high that the British ambassador to Germany registered a formal complaint.
But as the deal was struck in Brussels, Mr Brown insisted Europe was 'fully united', adding: 'I'm not going to get into the domestic politics of any individual country, (but) whatever comments there have been this is the answer.'
Diplomatic spat: Two leading members of Angela Merkel's ruling coalition have laid into Gordon Brown's handling of the economic downturn
The newly-agreed fiscal stimulus, set to be worth around 1.5 per cent of the EU countries' GDP, included 'judicious reductions in tax' and increases in public spending.
The package is in line with the American policy, Mr Brown added.
It was agreed today despite the bitter row between Germany and Britain over each country's plan to handle the global financial crisis.
Yesterday, for the second time in two days, a member of Germany's ruling coalition has broken with diplomatic convention to deliver a highly personal attack on Mr Brown's economic record.
Steffen Kampeter, one of Miss Merkel's economic advisers, branded Britain's soaring debt levels a 'complete failure of Labour policy'.
And he made clear Germany felt it was patronised by Mr Brown when he was Chancellor.
Foreign Secretary David Miliband, accusing Mr Kampeter of links to David Cameron's Tories, said Mrs Merkel's agreement to an EU stimulus deal was proof Mr Brown was right to lead the way.
He also pointed out that German finance minister Peer Steinbruch, who accused Mr Brown of 'crass Keynesianism', is planning his own fiscal boost next year and the year after - to the tune of one per cent of Berlin's gross domestic product.
On Wednesday, Steinbruck accused Mr Brown of 'crass Keynesianism' in his approach to the crisis and derided the cut in VAT as 'breathtaking'.
'All this will do is raise Britain's debt to a level that will take a whole generation to work off,' he told Newsweek magazine.
In his broadside, Mr Kampeter said: 'After years of lecturing us on how we need to share in the gains of uncontrolled financial markets, the Labour politicians can't now expect us to share in their losses.
Frosty: It was all smiles as Gordon Brown (then the Chancellor of the Exchequer) and Peter Steinbruck (seen here holding the 1966 World Cup Final ball) meet at an event in 2006 but now they are at loggerheads over tackling the recession
'The tremendous amount of debt being offered by Britain shows a complete failure of Labour policy.'
But Mr Miliband said there was a strong pan-European commitment to a fiscal stimulus being discussed by European leaders at a summit in Brussels.
'What you will see is, from Mrs Merkel as well as from Gordon Brown, a very clear statement at the end of this council setting out their support for a European recovery package which includes a strong fiscal stimulus which is being supported right across Europe,' he told BBC radio.
Mr Miliband blamed German internal politics for the criticisms.
'What you have got is clearly internal politics in Germany ... you have got elections next year.'
The savage criticism left the two nations' governments scrambling to save their relationship from serious damage.
The apparently concerted attempt to belittle Mr Brown also risked making a mockery of his claim to be leading the global fight against recession.
Downing Street pointed out that Mr Kampeter is a fiscal conservative and a backbencher in Mrs Merkel's CDU party and does not speak for the German government.
His comments were obtained and circulated by the Tory party in an attempt to embarrass Mr Brown.
But they highlighted the deep divisions between the two countries over how to tackle the economic crisis.
Although Downing Street played down the dispute in public, it emerged last night that Britain's ambassador to Berlin took formal steps to raise the Government's concerns.
The Foreign Office confirmed that Sir Michael Arthur had 'expressed disagreement' over Mr Steinbruck's comments in a telephone conversation with the German finance ministry.
The split was apparent in Brussels last night as EU leaders discussed plans for the £200billion Europe-wide tax stimulus plan.
Enlarge
The Tories said the German comments showed Mr Brown is not universally admired overseas.
Party leader David Cameron said: 'What the German finance minister was saying is what we're saying. This enormous binge of borrowing is going to make the recession worse.'
A carefully-worded statement released by the German finance ministry last night attempted to dampen the row. Officials made clear that Mr Steinbruck's interview had not been intended as a direct criticism of Mr Brown, simply that the UK's plan for tackling the recession was not necessarily right for Germany.
'There is no question of criticising our British friends,' it said. 'Nothing is further from our minds. The finance minister simply made clear, in the context of a debate in Germany, why a temporary cut in VAT is not an appropriate instrument for Germany in the battle against the global recession.
'In the framework of a coordinated European response on the handling of the financial crisis and its consequences for the real economy, there is agreement that each member state can pursue measures adapted to the national situation.'
Observers pointed out however that there was no retraction of Mr Steinbruck's comments.
Downing Street desperately tried to paint the row as an internal row within Germany's ruling coalition.
One source said: 'All the front pages of today's German papers are about the crisis in the coalition. There are elections there next year and this is clearly the beginnings of an internal spat.'
The view initially had credence as Mrs Merkel backed the EU's proposed 200million euro fiscal stimulus package as she arrived for a Brussels economic summit - apparently giving Mr Brown a boost.
David Cameron said he agreed with the German finance minister
'Germany is aware of its responsibility as Europe's biggest economy and Germany will also look at what we may have to do,' she said.
Her remarks were amplified by Michael Glos, the German economy minister, who is a member of Bavaria's CSU, the sister party to Merkel's CDU.
Mr Glos, who wants Germany to introduce tax cuts totalling 25billion euros next year, said the country had an obligation to introduce new measures to stimulate its economy.
The intervention helped Mr Brown because it referred to a domestic initiative - exactly what Mr Steinbruck had dismissed.
Whitehall sources hailed the clashes and pointed out that Mrs Merkel is under pressure from the CSU, which is threatening to boycott the next coalition meeting in January unless the tax burden lightens.
One said: 'This is not an issue between us and Germany. It is an internal German issue.'
Mr Brown today defended the decision to cut taxes and raise borrowing to support the economy through a likely recession.
He told LBC Radio: 'The important thing is that almost every country around the world is doing what we have been doing.
'I do not want to get involved in what is clearly internal German politics here, because they have a coalition in Germany with different political parties.'
Mr Steinbruck tried to play down his comments, saying: 'There is no question of criticising our British friends. Nothing is further from our minds.'
ANALYSIS: GERMANY VS BRITAIN
The extraordinary attack on Gordon Brown's policies by Germany's finance minister shone a light on the contrasts between the UK and German economies
SIZE OF ECONOMY
The German economy was worth £1.7 trillion (US$3.2 trillion) at the end of 2007, making it Europe's largest economy. Its GDP per capita is £20,731 ($39,577). The Organisation for Economic Co-operation and Development expects Germany's economy to contract by 0.8 per cent next year, and rebound by a modest 1.2 per cent in 2010.
The British economy was worth £1.4 trillion ($2.7 trillion) at the end of 2007, making it Europe's second-largest economy. Its GDP per capita is £22,950 ($43,813). The OECD is predicting the deepest recession of any G7 nation next year, with a 1.1 per cent dive in GDP. The recovery will be 0.9 per cent in 2010.
ECONOMIC BREAKDOWN
Germany is the world's largest exporter, beating even China and Japan. Industry makes up nearly a quarter of its economy while services are about 60 per cent. Construction is a relatively modest 3.6 per cent.
Industry comprises 18% of the British economy. Services, including banking and insurance, comprise three-quarters of the economy. Construction is 6% of the economy. Per head of population, Britain is a larger exporter than the United States.
POPULATION
Germany has a population of 82 million, making it Europe's second-most populous nation after Russia. But this is likely to dramatically shrink to 70 million by 2060.
Britain has a population of 61 million, vying with France as Europe's third-most populous nation. But its rapidly-growing population is likely to overtake Germany's, reaching 77 million by 2060.
FISCAL STIMULUS
Berlin has been attacked across Europe because of its apparent reluctance to cut taxes and lift public spending to support the economy. The fiscal stimulus is most commonly calculated at £10billion, or around 0.5 per cent of GDP, but if measures adopted back in October are included, the boost rises to 1.3 per cent of GDP - more than Britain's.
In Britain, Gordon Brown's fiscal measures, including the VAT cut announced last month, amount to around £20billion, or 1 per cent of GDP.
UNEMPLOYMENT
German unemployment is currently 7.1% and is likely to rise. Joblessness has been a scourge for years.
Britain has been enjoying a resilient jobs market, with near-record levels of employment, but there are fears the good times are over. Unemployment stood at 5.8 per cent in September but OECD forecasts suggest it could reach 8.2 per cent by 2010.
PUBLIC DEBT
This has been relatively high in Germany for decades, currently standing at an alarming 65 per cent of GDP or £1.1trillion. This helps to explain why the government of Chancellor Angela Merkel is so anxious to reduce the burden on the economy.
In Britain, public debt is relatively low compared with many other European nations. But at 44 per cent of output, or £616billion, gross debt is still a worry and is set to grow.
PUBLIC SPENDING
Despite its reputation for bloated government, Germany's public spending actually consumes a slightly smaller share of the economy than in Britain, at 43.8 per cent of GDP last year.
In Britain, public spending has been soaring under Labour, though the Treasury's latest plans envisage a sharp slowdown in growth. Spending was 44.4 per cent of GDP last year.
TAX TAKE
Germany is roughly comparable with that of the UK, at nearly 44 per cent of GDP. Its top rate of income tax is 45pc, but there are additional levies.
British Government revenue amounts to 42pc of GDP, or nearly £550billion according to latest figures. Following the Pre-Budget Report the UK is introducing a new 45pc top rate of tax, putting it in a similar position to Germany.
INFLATION
Germany: Has been running at half UK rate lately, in part because consumers are sheltered from swingeing increases in utility bills. Inflation rose 2.5 per cent in October.
UK: Inflation is slowing, with some warning of deflation, but it remains high. Inflation was recorded at 4.5 per cent in October.
TRADE BALANCE
Germany: Its world-beating manufacturing sector has ensured Germany runs a comfortable trade surplus. This was recorded at £15billion in October. But with world demand declining sharply, Germany will not be immune from world recession.
Britain has consistently run trade deficits in recent years as we suck in more goods than we export. The gap stood at £3.9billion in October.
HOUSING MARKET
The German housing market has been in a state of perpetual stagnation in recent years with property values currently at around £150,000.
Property is Britain's Achilles heel, soaring to hyper-inflated levels in a decade-long surge that ended last year. In November the annual fall was recorded at 16 per cent by Halifax, and few expect the slide to abate soon.
dailymail.co.uk
Certain members of Germany's ruling coalition have criticised British Prime Minister's recent economic policy.
Brown claims fiscal victory over Germany as EU strikes deal on £178bn stimulus plan
By Benedict Brogan, Michael Lea and Mail Foreign Service
13th December 2008
Daily Mail
Gordon Brown claimed victory in the diplomatic row with Germany yesterday after a unanimous deal on a European-wide economic recovery package.
He seized on the support of Chancellor Angela Merkel for a £180billion fiscal stimulus as proof that she agreed with his policies of tax cuts and spending as the way out of recession.
It apparently drew a line under the clashes over using borrowing to kickstart the economy, which had marred relations between London and Berlin during a two-day EU summit.
As the Daily Mail revealed yesterday, tensions were at one point running so high that the British ambassador to Germany registered a formal complaint.
But as the deal was struck in Brussels, Mr Brown insisted Europe was 'fully united', adding: 'I'm not going to get into the domestic politics of any individual country, (but) whatever comments there have been this is the answer.'
Diplomatic spat: Two leading members of Angela Merkel's ruling coalition have laid into Gordon Brown's handling of the economic downturn
The newly-agreed fiscal stimulus, set to be worth around 1.5 per cent of the EU countries' GDP, included 'judicious reductions in tax' and increases in public spending.
The package is in line with the American policy, Mr Brown added.
It was agreed today despite the bitter row between Germany and Britain over each country's plan to handle the global financial crisis.
Yesterday, for the second time in two days, a member of Germany's ruling coalition has broken with diplomatic convention to deliver a highly personal attack on Mr Brown's economic record.
Steffen Kampeter, one of Miss Merkel's economic advisers, branded Britain's soaring debt levels a 'complete failure of Labour policy'.
And he made clear Germany felt it was patronised by Mr Brown when he was Chancellor.
Foreign Secretary David Miliband, accusing Mr Kampeter of links to David Cameron's Tories, said Mrs Merkel's agreement to an EU stimulus deal was proof Mr Brown was right to lead the way.
He also pointed out that German finance minister Peer Steinbruch, who accused Mr Brown of 'crass Keynesianism', is planning his own fiscal boost next year and the year after - to the tune of one per cent of Berlin's gross domestic product.
On Wednesday, Steinbruck accused Mr Brown of 'crass Keynesianism' in his approach to the crisis and derided the cut in VAT as 'breathtaking'.
'All this will do is raise Britain's debt to a level that will take a whole generation to work off,' he told Newsweek magazine.
In his broadside, Mr Kampeter said: 'After years of lecturing us on how we need to share in the gains of uncontrolled financial markets, the Labour politicians can't now expect us to share in their losses.
Frosty: It was all smiles as Gordon Brown (then the Chancellor of the Exchequer) and Peter Steinbruck (seen here holding the 1966 World Cup Final ball) meet at an event in 2006 but now they are at loggerheads over tackling the recession
'The tremendous amount of debt being offered by Britain shows a complete failure of Labour policy.'
But Mr Miliband said there was a strong pan-European commitment to a fiscal stimulus being discussed by European leaders at a summit in Brussels.
'What you will see is, from Mrs Merkel as well as from Gordon Brown, a very clear statement at the end of this council setting out their support for a European recovery package which includes a strong fiscal stimulus which is being supported right across Europe,' he told BBC radio.
Mr Miliband blamed German internal politics for the criticisms.
'What you have got is clearly internal politics in Germany ... you have got elections next year.'
The savage criticism left the two nations' governments scrambling to save their relationship from serious damage.
The apparently concerted attempt to belittle Mr Brown also risked making a mockery of his claim to be leading the global fight against recession.
Downing Street pointed out that Mr Kampeter is a fiscal conservative and a backbencher in Mrs Merkel's CDU party and does not speak for the German government.
His comments were obtained and circulated by the Tory party in an attempt to embarrass Mr Brown.
But they highlighted the deep divisions between the two countries over how to tackle the economic crisis.
Although Downing Street played down the dispute in public, it emerged last night that Britain's ambassador to Berlin took formal steps to raise the Government's concerns.
The Foreign Office confirmed that Sir Michael Arthur had 'expressed disagreement' over Mr Steinbruck's comments in a telephone conversation with the German finance ministry.
The split was apparent in Brussels last night as EU leaders discussed plans for the £200billion Europe-wide tax stimulus plan.
Enlarge
The Tories said the German comments showed Mr Brown is not universally admired overseas.
Party leader David Cameron said: 'What the German finance minister was saying is what we're saying. This enormous binge of borrowing is going to make the recession worse.'
A carefully-worded statement released by the German finance ministry last night attempted to dampen the row. Officials made clear that Mr Steinbruck's interview had not been intended as a direct criticism of Mr Brown, simply that the UK's plan for tackling the recession was not necessarily right for Germany.
'There is no question of criticising our British friends,' it said. 'Nothing is further from our minds. The finance minister simply made clear, in the context of a debate in Germany, why a temporary cut in VAT is not an appropriate instrument for Germany in the battle against the global recession.
'In the framework of a coordinated European response on the handling of the financial crisis and its consequences for the real economy, there is agreement that each member state can pursue measures adapted to the national situation.'
Observers pointed out however that there was no retraction of Mr Steinbruck's comments.
Downing Street desperately tried to paint the row as an internal row within Germany's ruling coalition.
One source said: 'All the front pages of today's German papers are about the crisis in the coalition. There are elections there next year and this is clearly the beginnings of an internal spat.'
The view initially had credence as Mrs Merkel backed the EU's proposed 200million euro fiscal stimulus package as she arrived for a Brussels economic summit - apparently giving Mr Brown a boost.
David Cameron said he agreed with the German finance minister
'Germany is aware of its responsibility as Europe's biggest economy and Germany will also look at what we may have to do,' she said.
Her remarks were amplified by Michael Glos, the German economy minister, who is a member of Bavaria's CSU, the sister party to Merkel's CDU.
Mr Glos, who wants Germany to introduce tax cuts totalling 25billion euros next year, said the country had an obligation to introduce new measures to stimulate its economy.
The intervention helped Mr Brown because it referred to a domestic initiative - exactly what Mr Steinbruck had dismissed.
Whitehall sources hailed the clashes and pointed out that Mrs Merkel is under pressure from the CSU, which is threatening to boycott the next coalition meeting in January unless the tax burden lightens.
One said: 'This is not an issue between us and Germany. It is an internal German issue.'
Mr Brown today defended the decision to cut taxes and raise borrowing to support the economy through a likely recession.
He told LBC Radio: 'The important thing is that almost every country around the world is doing what we have been doing.
'I do not want to get involved in what is clearly internal German politics here, because they have a coalition in Germany with different political parties.'
Mr Steinbruck tried to play down his comments, saying: 'There is no question of criticising our British friends. Nothing is further from our minds.'
ANALYSIS: GERMANY VS BRITAIN
The extraordinary attack on Gordon Brown's policies by Germany's finance minister shone a light on the contrasts between the UK and German economies
SIZE OF ECONOMY
The German economy was worth £1.7 trillion (US$3.2 trillion) at the end of 2007, making it Europe's largest economy. Its GDP per capita is £20,731 ($39,577). The Organisation for Economic Co-operation and Development expects Germany's economy to contract by 0.8 per cent next year, and rebound by a modest 1.2 per cent in 2010.
The British economy was worth £1.4 trillion ($2.7 trillion) at the end of 2007, making it Europe's second-largest economy. Its GDP per capita is £22,950 ($43,813). The OECD is predicting the deepest recession of any G7 nation next year, with a 1.1 per cent dive in GDP. The recovery will be 0.9 per cent in 2010.
ECONOMIC BREAKDOWN
Germany is the world's largest exporter, beating even China and Japan. Industry makes up nearly a quarter of its economy while services are about 60 per cent. Construction is a relatively modest 3.6 per cent.
Industry comprises 18% of the British economy. Services, including banking and insurance, comprise three-quarters of the economy. Construction is 6% of the economy. Per head of population, Britain is a larger exporter than the United States.
POPULATION
Germany has a population of 82 million, making it Europe's second-most populous nation after Russia. But this is likely to dramatically shrink to 70 million by 2060.
Britain has a population of 61 million, vying with France as Europe's third-most populous nation. But its rapidly-growing population is likely to overtake Germany's, reaching 77 million by 2060.
FISCAL STIMULUS
Berlin has been attacked across Europe because of its apparent reluctance to cut taxes and lift public spending to support the economy. The fiscal stimulus is most commonly calculated at £10billion, or around 0.5 per cent of GDP, but if measures adopted back in October are included, the boost rises to 1.3 per cent of GDP - more than Britain's.
In Britain, Gordon Brown's fiscal measures, including the VAT cut announced last month, amount to around £20billion, or 1 per cent of GDP.
UNEMPLOYMENT
German unemployment is currently 7.1% and is likely to rise. Joblessness has been a scourge for years.
Britain has been enjoying a resilient jobs market, with near-record levels of employment, but there are fears the good times are over. Unemployment stood at 5.8 per cent in September but OECD forecasts suggest it could reach 8.2 per cent by 2010.
PUBLIC DEBT
This has been relatively high in Germany for decades, currently standing at an alarming 65 per cent of GDP or £1.1trillion. This helps to explain why the government of Chancellor Angela Merkel is so anxious to reduce the burden on the economy.
In Britain, public debt is relatively low compared with many other European nations. But at 44 per cent of output, or £616billion, gross debt is still a worry and is set to grow.
PUBLIC SPENDING
Despite its reputation for bloated government, Germany's public spending actually consumes a slightly smaller share of the economy than in Britain, at 43.8 per cent of GDP last year.
In Britain, public spending has been soaring under Labour, though the Treasury's latest plans envisage a sharp slowdown in growth. Spending was 44.4 per cent of GDP last year.
TAX TAKE
Germany is roughly comparable with that of the UK, at nearly 44 per cent of GDP. Its top rate of income tax is 45pc, but there are additional levies.
British Government revenue amounts to 42pc of GDP, or nearly £550billion according to latest figures. Following the Pre-Budget Report the UK is introducing a new 45pc top rate of tax, putting it in a similar position to Germany.
INFLATION
Germany: Has been running at half UK rate lately, in part because consumers are sheltered from swingeing increases in utility bills. Inflation rose 2.5 per cent in October.
UK: Inflation is slowing, with some warning of deflation, but it remains high. Inflation was recorded at 4.5 per cent in October.
TRADE BALANCE
Germany: Its world-beating manufacturing sector has ensured Germany runs a comfortable trade surplus. This was recorded at £15billion in October. But with world demand declining sharply, Germany will not be immune from world recession.
Britain has consistently run trade deficits in recent years as we suck in more goods than we export. The gap stood at £3.9billion in October.
HOUSING MARKET
The German housing market has been in a state of perpetual stagnation in recent years with property values currently at around £150,000.
Property is Britain's Achilles heel, soaring to hyper-inflated levels in a decade-long surge that ended last year. In November the annual fall was recorded at 16 per cent by Halifax, and few expect the slide to abate soon.
dailymail.co.uk
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