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Ministers shrug off German attack Brown shrugs off German attacks
(about 1 hour later)
Government ministers have shrugged off the German finance minister's criticism of Gordon Brown's plans to boost the British economy. Gordon Brown has shrugged off criticism from Germany's finance minister of his economic policies, saying the remarks were influenced by internal politics.
Peer Steinbruck criticised the decision to cut VAT and raise national debt levels, saying the UK's response to the crisis was "crass" and "breathtaking".Peer Steinbruck criticised the decision to cut VAT and raise national debt levels, saying the UK's response to the crisis was "crass" and "breathtaking".
But Ed Balls defended the policy as the "right thing to do" and said it was the Conservatives who were "isolated". Mr Brown said Germany had intervened to support its banks and to inject money into the economy as Labour had done.
And Jacqui Smith said she "disagreed" with Mr Steinbruck's analysis. But the Tories said the German comments were a "stark warning" to Labour.
But the BBC's Norman Smith said No 10 was keen to play down any disagreement between the two countries. In step
Diplomacy The Lib Dems said Germany's leaders were "fed up being lectured" by Mr Brown over how to run their economy.
Downing St says that Germany has introduced its own package of extra spending and that German Chancellor Angela Merkel is sympathetic to the British approach.
Mr Steinbruck's comments, in an interview with Newsweek magazine, represented an unusual breach of standard diplomacy.Mr Steinbruck's comments, in an interview with Newsweek magazine, represented an unusual breach of standard diplomacy.
He questioned the effectiveness of the decision to cut VAT from 17.5% to 15%, saying "are you really going to buy a DVD player because it now costs £39.10 instead of £39.90?". The important thing is that almost every country around the world is doing what we have been doing Gordon Brown class="" href="/1/hi/business/7776718.stm">Germany 'out of step' on downturn class="" href="http://www.bbc.co.uk/blogs/nickrobinson/2008/12/null_points_fro.html">Nick Robinson's blog
We need to save the world from a deeper downturn and we will only do that by concerted international action together Ed Balls class="" href="/1/hi/business/7776718.stm">Germany 'out of step' on downturn class="" href="http://www.bbc.co.uk/blogs/nickrobinson/2008/12/null_points_fro.html">Nick Robinson's blog They also exposed apparent divisions in Europe over its response to the global economic downturn as EU leaders prepare to gather in Brussels on Thursday for a summit to discuss the issue.
"All this will do is raise Britain's debt to a level that will take a whole generation to work off," he added. No 10 appears keen to play down any disagreement between the two countries and to highlight the fact Chancellor Angela Merkel is sympathetic to the British approach.
Mr Steinbruck questioned why Britain was "tossing around billions" and closely following the high public spending model put forward by 20th Century economist John Maynard Keynes. Mr Brown said he believed Mr Steinbruck's comments were "clearly" affected by domestic political considerations in which he did not want to get involved.
Mr Steinbruck's Social Democratic Party shares power with Ms Merkel's rival Christian Democrats and tensions in the coalition have resurfaced ahead of next year's elections.
But Mr Brown defended the government's decision to cut taxes and raise borrowing to support the economy through a likely recession.
"The important thing is that almost every country around the world is doing what we have been doing," he told LBC Radio.
He added: "Actually the German government is investing more. They have just announced a fiscal expansion so that they can invest in public works and helping their banks and doing these sort of things."
Mr Steinbruck questioned the effectiveness of the UK's decision to cut VAT from 17.5% to 15%, saying "are you really going to buy a DVD player because it now costs £39.10 instead of £39.90?".
He also questioned why Britain was "tossing around billions" and closely following the high public spending model put forward by 20th Century economist John Maynard Keynes.
"The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking," he said."The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking," he said.
'Robust views' 'No clothes'
Schools Secretary Ed Balls hit back, suggesting the comments had more to do with Germany's internal politics in its ruling coalition than the nature of the global response to the economic downturn. Shadow chancellor George Osborne said the criticism undermined the government's claims that other countries were following the UK's lead over the economy and "vindicated" Tory warnings over the effectiveness of the VAT cut.
Mr Steinbruck is a member of the Social Democratic Party which shares power with Angela Merkel's rival Christian Democrats. "It is a kind of moment when the emperor is discovered to have no clothes," he told the BBC.
Mr Balls said Mr Steinbruck was known for his "strong and robust views" but he defended the UK's course of action in cutting taxes and raising borrowing, saying it had widespread support across the world. "Gordon Brown has told everyone that the world agrees with him. Today the world answered back."
"It is the right thing to do to act now to keep jobs, to keep people in their homes and to keep the economy moving," he told Sky News. For the Lib Dems, Vince Cable said he agreed with Mr Steinbruck's criticism of the UK's VAT cut, saying it was not a "sensible way to inject activity into the economy".
"We need to save the world from a deeper downturn and we will only do that by concerted international action together. Britain, and Gordon Brown, is leading that action." Mr Steinbruck did not mince his words Mr Steinbruck did not mince his words
He added: "I think Germany will join the international consensus when their internal politics are sorted out." While he accepted Germany was "out of line" with most European countries over the size of the fiscal stimulus needed, Mr Cable said they were "making a case for greater financial discipline".
Shadow chancellor George Osborne said the criticism undermined the government's claims that other countries were following the UK's lead in how best to lessen the impact of the global slowdown. Other Cabinet ministers have defended Labour's policy, arguing it has widespread support across the world.
"This comment from the German finance minister totally demolishes Gordon Brown's central political charge that only the Conservatives oppose his expensive and ineffective VAT measures," he said. "We need to save the world from a deeper downturn and we will only do that by concerted international action together," Ed Balls said.
But Mr Balls maintained that the Tories were "isolated" over the need for fiscal action to support the economy, saying they were "out of step with the British people and the rest of the world". "Britain, and Gordon Brown, is leading that action."
Home Secretary Jacqui Smith said the government was doing what was needed to support the economy and its approach was widely supported by the business community. Mr Balls maintained that the Tories were "isolated" over the need for fiscal support for the economy, saying they were "out of step with the British people and the rest of the world".
"I disagree with him," she told the BBC, referring to Mr Steinbruck's comments. Home Secretary Jacqui Smith said the government was doing what was needed to support the economy, stressing that she "disagreed" with Mr Steinbruck's analysis.
"What is important is that Gordon Brown and Alistair Darling are taking the action which we think is necessary and which has actually led the way internationally as well as helping us to get the country through a difficult economic time."
Rescue packageRescue package
The chancellor announced in last month's pre-Budget report that the government would inject an extra £20bn into the UK economy in a bid to get it moving again.The chancellor announced in last month's pre-Budget report that the government would inject an extra £20bn into the UK economy in a bid to get it moving again.
At least £15bn of this total will come from increased government borrowing, which is expected to take the UK's total annual public sector deficit £118bn next year.At least £15bn of this total will come from increased government borrowing, which is expected to take the UK's total annual public sector deficit £118bn next year.
FROM THE TODAY PROGRAMME More from Today programmeFROM THE TODAY PROGRAMME More from Today programme
While Mr Steinbruck has accused the UK of over-spending on the economic recovery, the German government has put 480bn euros (£370.4bn; $645bn) into a rescue package for its banks.While Mr Steinbruck has accused the UK of over-spending on the economic recovery, the German government has put 480bn euros (£370.4bn; $645bn) into a rescue package for its banks.
Most other European governments have also increased public spending to try to ease the impact of the economic downturn.Most other European governments have also increased public spending to try to ease the impact of the economic downturn.
France recently announced plans to spend 26bn euros, and the European Commission wants to spend 200bn euros across the EU.France recently announced plans to spend 26bn euros, and the European Commission wants to spend 200bn euros across the EU.
Prime Minister Gordon Brown will attend an EU summit on the economic crisis in Brussels later. French President Nicolas Sarkozy said countries must show "vision and a spirit of compromise" to navigate their way through the downturn. Ahead of the Brussels summit, French President Nicolas Sarkozy said countries must show "vision and a spirit of compromise" to navigate their way through the downturn.
"We shall be required to take a series of decisions with highly significant implications for the future of Europe," he wrote in a letter to other European leaders."We shall be required to take a series of decisions with highly significant implications for the future of Europe," he wrote in a letter to other European leaders.
"I am determined that the European Council lives up to its responsibility and to citizens' expectations.""I am determined that the European Council lives up to its responsibility and to citizens' expectations."