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Brown hit by torpedo from Germanys Frau Nein - Feature


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Thu, 11 Dec 2008 11:33
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London - With the British pound on the verge of parity with the euro, and the Conservative opposition accusing Prime Minister Gordon Brown of a ruinous borrowing binge, the German broadside against Britain's "deficit spending" is bound to hurt. The criticism by German finance minister Peer Steinbrueck of Brown's decision to "spend his way out of recession" hit London like a bombshell Thursday, laying bare the fundamental differences between London and Berlin over how to tackle the global crisis.

Furthermore, the German verbal torpedo hit Downing Street just as parliament - and the country - were still reeling with laughter at a verbal slip-up by Brown in the Commons - in which he claimed to have "saved the world" by leading the way with early massive bail-out measures.

Downing Street explained later that Brown, quickly dubbed "superman" by the Opposition, had meant to say Britain had "led the world" in the anti-recession fight, taking his lead from the more "aggressive" US approach rather than the reluctant Europeans.

Officials were Thursday said to be "unhappy" about Steinbrueck's remarks, in US magazine Newsweek, that Britain had opted for a "crass Keynesianism" that would leave future generations to foot the bill - a charge levelled extensively at Brown at home.

As far as Newsweek is concerned, Steinbrueck spoke for Chancellor Angela Merkel, dubbed "Germany's Frau Nein" by the magazine.

Brown, against the opinions of many economists who - broadly-speaking - would back the Steinbrueck view - decided last month to throw prudence overboard and opt for a policy of spend, spend, spend to soften the impact of the impending recession.

"The same people who would never touch deficit spending are now tossing around billions. The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking," said Steinbrueck.

Britain's net borrowing is set to rise to 120 billion pounds (179 billion dollars), and will exceed 1 trillion pounds by 2013, shattering Brown's "golden rule" that debt should not rise above 40 per cent of the Gross Domestic Product (GDP).

Many analysts in Britain have predicted that the borrowing policy, coupled with slowing output, a stalling housing market, slowed-down consumer spending and a continuing lending freeze by banks, could - among other repercussions - spark a run on the pound.

With the British currency, which at the behest of Brown stayed out of the euro zone, now at an all-time low of 1.13 euros, some politicians have agreed with recent remarks by EU Commission President Jose Manuel Barroso that Britain was moving - or being moved - towards membership of the euro.

Brown's measures, which include a one-year-long cut in Value Added Tax (VAT) to 15 per cent, have prompted the Conservatives to accuse Labour of steering the country into bankruptcy.

The Conservatives have been watching open-mouthed as Brown, who was "out for the count" - politically speaking, in the summer, has grown in stature for his handling of the crisis, according to opinion polls.

But, given the risks they believe are inherent in Brown's policies, the Conservatives have called for an early general election, a move that some analysts say could be preempted by Brown as early as spring, 2009.

Brown's "recovery" - as viewed from London - was further boosted this week when France's Nicolas Sarkozy and the EU's Barroso flew into London for a "mini-summit" to pledge unity over the need to follow up the multi-billion bail-out packages with a "fiscal stimulus."

To that, Merkel - and her finance minister - have so far said a strict "Nein" - fearing a level of state borrowing that would be regarded as unacceptable by stability-conscious German voters.

For Brown, who at the EU summit in Brussels will no doubt plant a hesitant kiss on "Frau Nein's" cheek, the torpedo from Germany and the broadsides at home vouch for an unhappy combination - designed to hit where it hurts most.


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