Merkel Resists Party Calls to Spend More to Tackle Recession

Germany's chancellor, Angela Merkel, yesterday defended her refusal to spend her way out of recession, telling conservative critics that there would be no short-term shot in the arm for the German economy like the measures being implemented in Britain, France and the US.

Following her refusal to cut taxes and social welfare costs, economic liberals within her Christian Democratic Union (CDU), which is holding its annual conference, have accused her of dithering and losing Germany's leadership role in Europe, and have said that the country needs a far more ambitious rescue package. Germany is already in recession and is predicted to lose 700,000 jobs.

Yesterday, Merkel hit back, refusing to introduce "any immediate measures to stimulate the economy for a limited period of time," and adding: "We will not take part in a competition to outdo one another with an endless list of new proposals, in a senseless contest over billions."

The remark was an apparent swipe at the French president, Nicolas Sarkozy, who had said that France was "working on" a solution to the crisis while Germany "is thinking about it". The cover of Der Spiegel magazine summed up the mood, with the headline "Angela the despondent one: the dangerous dithering of a chancellor in the economic crisis".

Horst Seehofer, the new leader of the CDU's sister party, the Christian Social Union, accused Merkel of being over cautious. "In such a difficult situation we cannot rescue the country by saving it to death and aggravating the crisis," he said.

Michael Glos, the economics minister, has repeatedly urged Merkel to cut taxes for people on low and medium incomes while she has refused at least until after the next election in September 2009.

Merkel's popularity since she became chancellor three years ago has helped to silence some critics, not least because of the election. Opinion polls say voters are satisfied that she has already dealt with the crisis, having adopted a €480bn (£409bn) bank bailout package, even though critics point out that hardly any banks have dipped into the voluntary fund.

Economists say Merkel has no choice but to stimulate the economy. "If you have the choice between getting the black death or cholera, you should choose cholera, which you're more likely to survive," said Bert Rürup, a leading economist.