Wall Street Journal:
By MARCUS WALKER in Berlin and ADAM COHEN in Brussels
European Union leaders, meeting at a Brussels summit, rejected calls to expand their fiscal-stimulus policies, or to boost aid for struggling Eastern European countries.
The EU leaders said they are willing to provide $75 billion to increase the International Monetary Fund’s war chest, provided the U.S. and China also pledge money. The IMF is seeking to double its resources for helping countries to $500 billion from $250 billion.
(Vi har tilføjet denne tekst under billedet:) Vi undrer os ikke over de institutions-traditionelle, latterlige, men obligatoriske masse-portrætter, som altid viser os en flok grinende, nærmest upåvirkede galninge/skuespillere, der absolut intet aner om det, som de har med at gøre undtaget i bedste fald rollen.
But key EU countries including Germany and the U.K., are opposed to expanding the bloc’s own fund for helping ailing economies in Central and Eastern Europe. Much of that €25 billon fund ($32.7 billion) has been spent on aid to Hungary and Latvia.
Throughout Europe, the strain is reaching the real economy. According to news reports, in cities and towns across France Thursday, more than one million people marched to demand more government action to address the effects of the crisis.
Germany and other major European countries are under pressure from the U.S. to do more to support the sagging world economy through tax cuts or higher government spending. So far the EU, led by Germany, has rejected calls for additional stimulus measures and warned the U.S. not to press the issue at the coming summit of 20 leading economies in London on April 2.
German Chancellor Angela Merkel said in a speech to Germany’s parliament on Thursday that her government was doing more than most to support the world economy through higher spending and lower taxes. Germany’s stance could come under pressure from financially weaker countries within Europe as their economies sink deeper into trouble, economists say.
Struggling EU countries range from Ireland and Spain, where housing-market bubbles have burst, to Hungary and Latvia in the continent’s post-communist East, where capital flight has forced governments to seek IMF aid.
Although Germany is in its worst recession in 60 years, Europe’s biggest economy has relatively strong public finances and enjoys the trust of capital markets.
That means Germany could be doing more to raise its domestic demand through higher government borrowing, say critics. Germany’s reluctance to do so means its neighbors’ recessions will be worse than necessary, says Julian Callow, European economist at Barclays Capital.
Nordic countries, the Netherlands and Switzerland can help in this process, Mr. Callow says, but Germany is by far the biggest country with a trade surplus.
The consequence of Germany’s cautious fiscal policy could be that Spain, Italy, Ireland and other financially weak economies will have to slash wages and other costs to restore their competitiveness. These euro-zone countries no longer have their own currencies, so they can’t do it by devaluing their exchange rates.
Germany’s defenders say the country is already doing a lot. Germany’s extra spending plans and tax trims add up to 3.5% of GDP, spread out over this year and next. Fiscal-support measures even come to 4.7% of GDP if the automatic effects of higher benefits and lower tax revenue in a recession are added, according to the government.
“Germany is already going to the limit of what is financially possible to stimulate the economy,” says Jörg Krämer, chief economist at Commerzbank in Frankfurt. The country is on track for a budget deficit of 5% to 6% of GDP next year, compared with a balanced budget in 2007, he says. Spain, Italy and other struggling economies have structural problems, rather than a problem of insufficient demand in Germany, says Mr. Krämer.
Ms. Merkel and other German policy makers are reluctant to add to their deficit spending for several reasons. Germany faces growing fiscal strains because its aging population spells rising pension and health-care spending. Recent governments have tried hard to cut public debt as the population ages.
Germany is a backer of EU fiscal rules that forbid excessive budget deficits, and Berlin fears that if it sheds that role, other countries will splurge and end up with more debts than they can repay. Then, the thinking in Berlin goes, German taxpayers will have to bail out spendthrift Italians and others.
Vi har ikke just holdt det hemmeligt de sidste 12 år, hvorledes det ville gå
Why the Meltdown Should Have Surprised No One