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Germany Must Boost Spending to Fight Recession: IMF Chief

Germany must increase public spending in line with other European countries to ward off a deepening recession, International Monetary Fund (IMF) Director-General Dominique Strauss-Kahn said Thursday, Dec. 18.

The Managing Director of the International Monetary Fund (IMF), French, Dominique Strauss-Kahn

Strauss-Kahn says Germany should act with other EU nations and boost spending

The IMF chief urged Chancellor Angela Merkel's government to parallel mitigating steps taken by other EU nations to curb the global economic downturn. He said Berlin should put still more money on the table in addition to the existing stimulus package it has announced.

"It would be helpful if the German government, whose reluctance I fully understand, were able to take another step" and introduce further measures to aid the economy, the head of the Washington-based IMF told Germany's "ZDF" public television network.

He said Merkel's wait-and-see attitude while other European governments had set out plans to re-energize their economies was not the ideal approach for pulling Europe's largest economy out of recession.

Such measures "make all the more sense when they are taken by all sides at the same time," Strauss-Kahn said.

German Chancellor Angela Merkel

Merkel remains cautious over implementing further stimulus packages too soon

He added that European economies would likely experience negative growth of 1 to 2 percent in 2009, and that "the economic consequences will be truly hard for the little guy."

Merkel wary of budget deficit

So far, Merkel's grand coalition government has announced a series of measures totaling up to 32 billion euros ($44 billion) to help spur economic growth.

But she has also faced calls from within the ranks of her own political bloc for the government to underpin the economy by cutting taxes.

Instead, however, Merkel and her government have refused to take action they consider rash to help Germany limp through the current global crisis, especially measures that could lead to a deepening of the nation's budget deficit.

New Year's resolution

US President-elect Barack Obama

Germany will wait to see what the US does under Barack Obama, Merkel hinted

Criticism of Merkel's so-far-modest attempts to shield Germany from the global downturn has triggered a slump in her popularity, prompting the chancellor to tell business leaders Tuesday, Dec. 16, they could expect a firmer response from the government early next year.

In the speech to the Center for European Economic Research, a think-tank in Mannheim, Germany, she acknowledged the government's stimulus package "might not suffice," but hinted that she wanted to coordinate future efforts with the incoming US administration under Barack Obama, who takes office January 20.

"We will take action again in January -- another few billion could come together," she told them amid press reports suggesting Berlin would invest up to 30 billion euros ($42 billion) more to drag the economy out of its slump.

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