Why spendthrift Brown is scaring the Germans

It may seem like a worn-out cliché, but the haunting black and white newsreel pictures of jubilant Nazi Brownshirts goose-stepping through Berlin's Brandenburg Gate after Hitler's 1933 "seizure of power" almost certainly influenced the German Finance Minister's withering attack on Gordon Brown.

In Germany, few people have to get out their history books to be reminded that the ghastly trauma of Nazi rule was a direct consequence of a Great Depression in which people queued up with wheelbarrows full of devalued Reichsmarks to buy food.

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Economic prudence and caution have remained indelibly ingrained in Germany's collective psyche ever since. Hard work, sacrifice and saving are seen to have produced the post-war "Economic Miracle" and the once mighty deutschmark.

The currency's replacement by the now increasingly mighty euro – sold to the reluctant Germans as the ultimate guarantee against future wars in Europe – would have been unthinkable without the German-dictated, cast-iron rules of the stability pact.

Spending one's way out of a crisis in the manner chosen by Mr Brown is considered an option that is risky and unwise, particularly when it is advocated by one of Europe's former champions of fiscal prudence.

When Peer Steinbrück attacked Westminster's decision to cut VAT and insisted, "this will raise Britain's debt to a level that will take a whole generation to work off", he was echoing the views of millions of ordinary Germans.

Their near no-risk attitude to money is reflected in their spending habits: the Germans have minimal debt, few credit cards, no sub-prime mortgages and what could almost be described as a national phobia about the stock market. Just over 15 per cent of Germans own shares and some 500,000 of them sold what they had at the first signs of the credit crunch in August 2007.

Less than half of Germany's 80 million citizens have mortgages, and a 30 per cent deposit before buying a home is the norm. Sixty per cent of the population lives in rented accommodation and only 5 per cent use credit cards regularly. Most people pay cash or use direct-debit cards. Experts such as Fabian Christiandl of Cologne's university's economic research institute admit: "The puritanical ethic of the war generation is still very much a part of today's Germany."

So it is hardly surprising that Chancellor Angela Merkel's government has erred on the side of caution, many would say extreme caution, in its response to the credit crunch. But Germany's position as Europe's "odd man out" in the crisis has as much to do with its politics as its national spending habits.

Britain and France, countries regarded by Germany as Europe's big spenders in their response to the crisis, are both led by deeply unpopular politicians who have at last been given what must seem like a heaven-sent opportunity to prove their worth to voters.

Ms Merkel's position could hardly be more different: she rates as one of the most popular post-war German leaders on record and, unlike Gordon Brown and Nicolas Sarkozy, she faces a general election next year. Opinion polls suggest her conservative Christian Democrats, who are in a grand coalition with Mr Steinbruck's Social Democrats, will win only about 36 per cent of the vote. But they also show that more than 50 per cent of Germans would chose Ms Merkel as leader if she could be elected directly. So Germany's conservatives hope a "Merkel bonus" will win them the election.

The Chancellor, whose father was an East German Protestant pastor, appeals to voters because of her temperate, unruffled approach to problems, which contrasts sharply with that of most of her predecessors. Almost as soon as the credit crunch began to bite, she proclaimed that the German economy was "strong enough" to withstand the crisis.

Insisting that Germany would not take part in a "pointless race to spend billions" her government has stumped up what many consider to be a rather meagre €32bn emergency package to offset the effects of the credit crunch and resisted calls for tax cuts, at least for the time being. Ms Merkel has been supported by Mr Steinbrück whose robust and vociferous opposition to further spending is notorious. "The fact that all the lemmings have chosen the same path doesn't automatically mean that it's the right path," he said.

Ms Merkel's tactic has been to stand firm on tax cuts; she wants to present them to voters as part of her election package next year and considers that to introduce them now would deprive her party of an advantage at the polls. Her problem is that this tactic is starting to unravel, some say badly.

On Monday, Messrs Brown, Sarkozy and EU Commission President Jose Manuel Barroso met in London to prepare for the EU summit. Not so long ago, it would have been routine for Germany and France to get together before such a summit in an attempt to influence its outcome. This time, Ms Merkel was not even invited.

And she has won herself the nickname "Madame No" in many European capitals, including Brussels, and her reluctance to take more forthright action over the credit crunch has led to pictures of a po-faced German Chancellor on the front cover of the country's influential news magazine Der Spiegel with the headline " Timid Angela".

The economic data is hardly encouraging: the German car industry is reporting a "downturn unprecedented in magnitude and pace", medium-sized businesses are clamouring for immediate tax cuts and a bolder stimulus package. And Ms Merkel has come under fierce attack from her Bavarian conservative sister party for failing to introduce tax cuts, while the left-wing of the Social Democratic Party is at war with its Finance Minister.

Ms Merkel plans an urgent meeting on Sunday. But she and Mr Steinbrück insist they will not announce any new measures until 5 January. Several German economists have pointed out that if any remedies are announced they will not begin to take effect until Easter at the earliest, and that they say, may be too late.