Gordon Brown’s call for a “global new deal,” in which the G20 leaders would provide more than $2 trillion in stimulus to fight the global recession, is finding no takers in Europe.
Amusingly, the venerable Times of London is blaming it on the Germans, headlining their report “Brown snubbed over tax – Germans wreck ‘global new deal.’” But, as even a quick read of the story makes clear, the proposal was a non-starter.
Angela Merkel, the German chancellor, last night led the assault on the prime minister’s “global new deal” for a $2 trillion-plus fiscal stimulus to end the recession. “I will not let anyone tell me that we must spend more money,” she said.
The Spanish finance minister, Pedro Solbes, also dismissed new cash being pledged at Thursday’s London summit. “In these conditions I and the rest of my colleagues from the eurozone believe there is no room for new fiscal stimulus plans,” he said.
Nicolas Sarkozy, the French president, has insisted that “radical reform” of capitalism is more important than tax cutting.
The attacks on Brown’s ambitions for the G20 to inject more money into the world economy come at the end of a week where the prime minister has travelled to three continents to build support for his proposals. The likely deadlock at this week’s meeting will kill any remaining hope that Alistair Darling’s April 22 budget will offer significant tax cuts.
The assault by European Union leaders also represents a defeat for President Barack Obama, who is desperate for other big economies to copy his $800 billion stimulus plan. “There will be a very long communiqué, but there won’t be much in it,” said a Washington economist.
But we knew that. It has been perfectly obvious for months that there was no consensus among Europe’s Big 3, much less the Eurozone, let alone the G20 on this matter. While all nominally agree that this is a global crisis that calls for a coordinated response, there’s widespread discord on actual policy solutions. Even within member countries — indeed, even within Obama’s own financial team — there’s disagreement. Such is the nature of incredibly complex problems for which no real precedent exists to provide a roadmap.
So, why blame the Germans?
[A] draft of the agreement Brown hopes to secure was leaked to a German news magazine, prompting suggestions of “dirty tricks” by Berlin.
[…]
A No 10 source expressed “disappointment” at the leak and insisted the $2 trillion figure was not new money but an expression of the total tax and spending packages already pledged by G20 members.
Well, if that’s the case, exactly what was “scuppered” here? And this vitriol is priceless:
Merkel’s criticism drew an angry response from Labour MPs. Denis MacShane, the former Europe minister, said: “Who does Mrs Merkel think is going to buy Mercedes and BMWs if she … says putting demand into the economy is a bad thing?” Another Labour MP said: “One has to ask who had something to gain from the leak of the communiqué. This feels like a dirty trick.”
It would take a mighty big stimulus, indeed, to stimulate demand for luxury automobiles. Still, if Brown wishes to start small, I’ll be happy to take a SLK55 off his hands.