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No Spending Spree

sms/th/ap/dpa/reutersMarch 12, 2009

German Chancellor Merkel and French President Sarkozy met in Berlin to discuss how to best fight the global recession. Both favor tighter regulation of financial markets instead of increased spending measures.

Sarkozy and Merkel at a press conference
Sarkozy and Merkel went to lengths to emphasize their agreement on ThursdayImage: AP

The heads of France and Germany came out against a call from the United States that they increase spending to counteract the global economic crisis. Instead they said more regulation of financial markets needed to be the focus of a G20 meeting next Month.

"We consider that in Europe we have already invested a lot for the recovery, and that the problem is not about spending more, but putting in place a system of regulation so that the economic and financial catastrophe that the world is seeing does not reproduce itself," Sarkozy told reporters in Berlin on Thursday, March 12.

When G20 leaders meet April 2 in London, Merkel said they should look to pledges made by European Union members last month in the German capital to regulate all financial markets, crack down on tax havens and increase funding for the International Monetary Fund.

Merkel said economic rescue packages "can under no circumstances replace the necessary regulation" of the financial markets.

US Treasury Secretary Timothy Geithner said Wednesday that he wanted the G20 to make a "substantial, sustained commitment to stimulus" as a way of stemming the global economic downturn.

Britain veering from EU position?

Brown walking with US President Barack Obama during a visit to the White House
Is Brown going to side with Washington at the G20 meeting?Image: AP

His British counterpart, Alistair Darling, said he agreed with Washington's spending policy, setting the stage for an inter-European feud.

Merkel went above Darling's head on Thursday saying that British Prime Minister Gordon Brown agreed with his European partners during meetings on the Berlin plan. She added that she was "very optimistic that the European position is unchanged."

Merkel is scheduled to meet with Brown in Britain for talks on Friday that are likely to address the issue of additional stimulus measures.

Meanwhile, to keep deficit spending in the EU in check, French and German finance ministers on Thursday reiterated their support for the bloc's Stability and Growth pact, which restricts public deficits to 3 percent of annual output.

Ministers from the two countries issued a joint statement saying they would pursue policies to strengthen public finances.

EU must fight protectionism

Sarkozy and Merkel greet each other with a kiss on the cheek
Sarkozy and Merkel are back to seeing eye-to-eyeImage: AP

Merkel and Sarkozy also used their meeting to launch joint industrial projects in the energy and automobile sectors. The plans cover innovations in the renewable energy sector and research into new methods of propulsion for motor vehicles.

The joint projects come after the two countries were at odds over Sarkozy's decision to provide financial support to the French car industry. Both leaders, however, agreed Thursday that all EU members should eschew any protectionist measures while coming to the aid of national industries.

In addition, Sarkozy offered his condolences to the victims of a school shooting which left 16 dead in southern Germany Wednesday.

"France was overwhelmed," by the attack, the French president said, adding that it could have happened "anywhere in the world."