The German Finance Minister has laid into Gordon Brown’s fiscal stimulus for economic recovery with a devastating two footed lunge. He responds to the stimulus proposals by saying:
‘The speed at which proposals are put together under pressure that don’t even pass an economic test is breathtaking and depressing. Our British friends are now cutting their value-added tax. We have no idea how much of that stores will pass on to customers. Are you really going to buy a DVD player because it now costs £39.10 instead of £39.90? All this will do is raise Britain’s debt to a level that will take a whole generation to work off. The same people who would never touch deficit spending are now tossing around billions. The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking. When I ask about the origins of the crisis, economists I respect tell me it is the credit-financed growth of recent years and decades. Isn’t this the same mistake everyone is suddenly making again, under all the public pressure.’
There goes the alleged international consensus on how to deal with the economic downturn and Brown’s claim that the Tories are the only ones out of sync on the measures that need to be taken to end the ‘global’ downturn. Will Brown now reply to questions by saying that all the big economies are advocating fiscal measures except the Tories and Europe’s biggest economy and the world’s leading exporter?
The mocking of Brown’s VAT cut is particularly scathing and his comment regarding Britain’s debt level is damning. Doesn’t look like this will go to penalties, the Germans are well ahead.