Up Yours Delors Redux

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German Finance Minister Peer Steinbrueck has criticised countries for rushing through what he called crass and untested economic rescue packages at a “breathtaking and depressing” pace.
In an interview with Newsweek magazine, Steinbrueck urged governments to pause before pledging to spend billions of dollars on plans to try and help their economies emerge from the global credit crunch.
A recession was unavoidable and governments should stop trying to outdo each other with ever bigger stimulus measures, said Steinbrueck.
“The speed at which proposals are put together under pressure that don’t even pass an economic test is breathtaking and depressing,” he said in the interview, published on the magazine’s website on Wednesday.
Steinbrueck singled out Prime Minister Gordon Brown for particular criticism, accusing him of switching to economic policies that would saddle a generation with debt.
“The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking.”
German Chancellor Angela Merkel’s government has expressed doubts as to whether ever-increasing fiscal boosts are the cure-all solution for every country’s economic ills.
“For a while the position in Brussels and a few other places has been, ‘We’re now very much for setting up large-scale spending programmes, but we’re not really going to ask what the exact effects of those might be. And since the amounts are so high, well, let’s get the Germans to pay because they can’,” said Steinbrueck.
“Ms. Merkel and I are trying to calm them down a bit just now, and understandably that’s getting us criticised.”
Leaders of Britain, France and the European Commission met in London on Monday to present a united front on a 200 billion euro (175.5 billion pounds) economic stimulus package for the EU, but Germany was left out of the talks.
European leaders are due to meet in Brussels on Thursday and Friday to discuss the proposal.
Asked what was wrong with stimulus proposals that some countries had already put forward, Steinbrueck was highly critical of Britain’s plans to inject record sums of money into its economy.
“Our British friends are now cutting their value added (sales) tax,” he said.
“We have no idea how much of that stores will pass on to customers … All this will do is raise Britain’s debt to a level that will take a whole generation to work off.”
Keynesianism is based on the theories of economist John Maynard Keynes, notably the use of government spending and low interest rates to stimulate demand during a recession.
Steinbrueck said people were naturally nervous about the financial crisis but that he wanted to give Germany’s own 31 billion euro stimulus package time to succeed.
“As long as we haven’t even given that a chance to work, I am not going to participate in this bidding war over who can do the most. I try to exude a little steadiness and continuity instead,” he said.