Brown dismisses German attack on economy rescue plan

Prime Minister Gordon Brown dismissed criticism of his economic rescue plan for the UK today as a matter of "internal German politics".

In a surprise attack, German finance minister Peer Steinbruck derided the headline 2.5 per cent cut in VAT announced by Chancellor Alistair Darling in the Pre-Budget Report while warning that a generation of taxpayers would be saddled with the debt.

In an interview with Newsweek magazine, he described the Government's switch to a "crass Keynesianiam" to try to spend its way out of the economic crisis after years of preaching fiscal rectitude as "breathtaking".

But Mr Brown, who will head to Brussels later today for a major European Union summit, told London's LBC Radio: "Actually the German government is investing more. They have just announced a fiscal expansion so that they can invest in public works and helping their banks and doing these sorts of things.

"I do not really want to get involved in what is clearly internal German politics here, because they have a coalition in Germany with different political parties.

"The important thing is that almost every country around the world is doing what we have been doing."

Not taking such actions would mean "failing in the role of Government", he said.

It is highly unusual for ministers of a friendly country to be so openly critical of the policies of an ally.

Mr Steinbruck said: "Our British friends are now cutting their value-added tax. We have no idea how much of that stores will pass on to customers. Are you really going to buy a DVD player because it now costs £39.10 instead of £39.90?

"All this will do is raise Britain's debt to a level that will take a whole generation to work off.

"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."

The Tories said Mr Steinbruck's comment "totally demolishes Gordon Brown's central political charge that only the Conservatives oppose his expensive and ineffective VAT measures".

"On the day he claimed to be saving the world, the world answered back," shadow chancellor George Osborne said, mocking a slip of the tongue by the Prime Minister in the Commons yesterday.

EU leaders are expected to back the European Commission's £160bn economic recovery package at the Brussels summit.

On Monday, Mr Brown and French president Nicolas Sarkozy, meeting in London, denied that they were at loggerheads with German chancellor Angela Merkel over the need for further action.

Mrs Merkel has reportedly been under pressure from Mr Steinbruck, who leads the Social Democratic Party bloc within the coalition government and who is firmly opposed to any further economic bail-out.

Mr Brown, answering calls from the station's listeners, said: "This is the right time for us to use what resources the Government can bring to bear to get the economy moving again.

"If we don't step in and provide help to people when they are facing the prospect of the loss of jobs or the prospect of arrears in their mortgages and repossession of their homes and if we don't step in to do our best to save small businesses then we are, in my view, failing in the role of Government."

He went on: "There is only one option and it is certainly not doing nothing."