German minister attacks UK stimulus

Bloomberg

In an interview with Newsweek, Peer Steinbrueck described the world’s sudden switch from "decades of supply side politics" to "crass Keynesianism" as "breathtaking." The people who "would never touch deficit spending are now tossing around billions," he said, and the only result will be to raise Britain’s debt to "a level that will take a whole generation to work off."

The comments are an embarrassment for Brown, who has tried to paint the opposition Conservatives as isolated in their hostility to his fiscal stimulus program. His handling of the economic crisis has helped to narrow the Conservative lead in opinion polls in the last three months.

"It doesn’t exist. It doesn’t exist!" Steinbrueck said of what he derided as "the Great Rescue Plan." Referring to Brown’s 2.5 percentage point cut in value-added tax, a levy on sales, he asked whether someone is "really going to buy a DVD player because it now costs 39.10 pounds ($58.35) instead of 39.90 pounds."

"This comment ... totally demolishes Gordon Brown’s central political charge that only the Conservatives oppose his expensive and ineffective VAT measures," Conservative Treasury spokesman George Osborne said in a statement. "On the day he claimed to be saving the world, the world answered back."

Brown has promised a 20 billion-pound package of tax cuts and spending between now and April 2010 to help counter Britain’s first recession since 1991. The Treasury predicts the budget deficit will soar to 8 percent of gross domestic product in the year starting April 2009, the highest among major industrial nations.