EU stimulus package mere 'populism'

GERMAN FINANCE minister Peer Steinbrück faces a showdown with EU colleagues this morning after dismissing a planned EU economic stimulus programme as “ineffective populism”.

While Paris announces industrial investment, London slashes VAT and Brussels drafts a €200 billion EU economic programme, Berlin maintains that the only certainty such measures generate is a ballooning public deficit.

“Just because all the lemmings have chosen the same way doesn’t make it automatically the right way,” said federal finance minister Peer Steinbrück in Der Spiegel magazine. In an interview dripping with sarcasm, Mr Steinbrück dismissed tax-refund cheques and VAT cuts as “a lovely idea . . . without any demonstrable effect”.

“How on earth do you know that it will be passed on to the retail sector? What else would you like for Christmas? I don’t contest that one should act anti-cyclically in a crisis, but I dispute the argument that ‘lots helps a lot’,” he said.

Chancellor Angela Merkel views such programmes as a flash in the pan that leaves behind nothing of substance.

In addition, the Germans don’t want to be seen as playing fast and loose with the euro zone deficit criteria rules they themselves demanded as a condition of the single currency. After some resistance, the German government has presented an economic package it claims is worth €31 billion over two years.

It has refused to back a planned EU-wide stimulus package unless it factors in the value of existing national programmes. Critics call the German plan a collection of repackaged measures worth no more than €5 billion next year.

Berlin’s position is winning it no friends around Europe. According to the le Canard enchaîné newspaper, French president Nicolas Sarkozy views Germany in the current situation as the “heavy wagon rather than the locomotive of Europe”.

Concerns that not enough is being done are beginning to spread at home, too. Leading conservatives in Chancellor Merkel’s own Christian Democrats (CDU) and its Bavarian sister party are calling openly for tax cuts.

The issue hung over the start of the CDU party conference yesterday thanks to a broadside by Der Spiegel against the German leader, who was caricatured on its cover as a sulking “Angela Fainthearted”. “On the thin ice of the crisis,” the magazine noted, “Sarkozy pirouettes and loops while Merkel cautiously feels her way forward on all fours.”