Germany Spurns Calls To Spend More To Fight Crisis

Der Spiegel said many economists believed Germany had so far not committed enough resources to countering the downturn.

German Finance Minister Peer Steinbrueck rejected European calls that he should spend more on battling the economic crisis, arguing that "just because all the lemmings have chosen the same path," that did not make it right.

In an interview with weekly magazine Der Spiegel, published on Saturday, Steinbrueck rejected suggestions he was stubborn and that the government's resistance to a bigger stimulus package had rendered it the "laughing stock of Europe."

"Nonsense," Steinbrueck said. "But that doesn't mean the Germans have to buy into every European suggestion if they can't see what it will do for the economy. Especially as Germany always ends up having to pay the most."

Chancellor Angela Merkel backed Steinbrueck's position in a separate interview published at the weekend.

Der Spiegel said many economists believed Germany had so far not committed enough resources to countering the downturn, including the government's own panel of economic advisers.

Steinbrueck, a member of the centre-left Social Democrats, said many experts had changed their position during the crisis, and that it was important for the government to be consistent.

"Just because all the lemmings have chosen the same path, it doesn't automatically make that path the right one," he said.

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DOING MORE, ACTING FASTER

Merkel told the Frankfurter Allgemeine Sonntagszeitung paper Germany did not want to free up more cash for an EU plan.

"Germany is making its contribution to the European stimulus package, and we're doing more and acting faster than many others in Europe. We're still making our 20 percent contribution to the EU budget. We don't want to raise this contribution.

"But there is the option of reallocating money and bringing forward measures," she said. "This is often more effective than just always calling for more money."

By changing competition rules or making more flexible use of structural funds, more resources could be freed up, she said.

Last week Steinbrueck rejected French calls to provide billions more euros to finance European Union economic growth.

An EU proposal is calling for states to unite in a fiscal stimulus package worth 200 billion euros ($259 billion).

The proposal comprises 1.2 percentage points from national budget spending and 0.3 points from EU funding. Germany says its stimulus plan amounts to 1.3 percent of national GDP, and that it is thereby "over-fulfilling" the Commission's plans.

Der Spiegel said the majority of the sum touted by the German government had been fixed before the crisis, and that its stimulus for next year would only be some 5 billion euros.

"It's not about the timing of when things were planned, it's about the effect," Steinbrueck said.

Past experience had taught him that stimulus plans were rarely effective, whereas the benefits of budgetary consolidation were obvious, he added.

"Since I've been dealing with economic stimulus packages, that is, since the end of the 1970s, they've never had the real effect that was hoped for. In the end, the state was just more in debt than before," said Steinbrueck, 61.

Under Steinbrueck, Germany's total public sector budget -- comprising finances at federal, state and local government level -- has improved markedly. It is due to be balanced this year after a deficit of nearly 75 billion euros in 2005.

The federal budget alone is still in deficit and the government had aimed to balance it by 2011, but this would not happen due to the crisis, Steinbrueck said.