Europe's Black Friday seized on to defend British policies

As G7 finance ministers gather, damning report shows scale of Germany's economic woes

Ministers have declared victory in their bitter war of words with Berlin over the handling of the global economic downturn after figures showed the German economy recorded one of the biggest slumps in Europe in the final months of last year.

They claimed vindication after European growth figures showed the German economy contracted by 2.1 per cent between October and December. British output fell by 1.5 per cent, in line with the average for eurozone nations.

Relations between Britain and Germany descended into a bitter diplomatic row in December when the German Finance Minister, Peer Steinbrück, accused Gordon Brown of "crass Keynesianism", warning that measures such as the Treasury's 2.5 per cent VAT cut would "take a whole generation to work off".

Yesterday, finance ministers gathered in Rome for the start of a G7 meeting to discuss the best way to tackle the global economic crisis, the first of its kind since October last year. Last night they attended an opening dinner before the real work begins today. It is hoped that new US Treasury Secretary Timothy Geithner will use the opportunity to give details of measures planned by the Obama administration to ease the downturn.

British ministers said the European industrial production figures suggested that the UK could emerge from the downturn stronger than its rivals. One said yesterday: "This is Europe's Black Friday. We don't minimise the problems people are facing in the recession, but it does put our problems in context."

Yesterday's figures showed that Lithuania, Germany, Slovakia, Portugal and Italy all suffered a worse fall in output than Britain during the final months of 2008. But other European countries such as France, Belgium, Spain, Hungary and Austria all fared considerably better.

A government source said: "Although Britain has one of the largest financial sectors, the one hit hardest and fastest by the global banking collapse, these statistics show that Britain continues to hold its own, with other countries like Germany facing a longer and deeper recession than Britain."

Denis MacShane, the former Europe minister, said: "In the past some British ministers and commentators used to make critical remarks about the Germans' policy on the economy and equally some French and Germans have been critical of Britain. Europe's political leaders have to realise that all of Europe is in an economic crisis and we need common policies to get out of it."

Lord Turnbull, the former head of the Civil Service, likened the period before the financial crisis to the failures of intelligence in the run-up to the Iraq war. He told Channel Four News: "Now what this is, is a collective failure: that people basically believed – and all sorts of people, the regulators, the bankers, the economic policy-makers – they believed in a particular view of the world and the things that should have acted as restraints in all of this – regulators, rating agencies, accounting, corporate governance – none of that worked because of the power of consensus.

"It was a bit like Y2K [the supposed millennium bug]. Why did we all believe Y2K? We all went along with each other ... weapons of mass destruction. A very strong collective belief comes about."

There was also anger at reports that staff at the Financial Services Authority could be in line for bonuses and pay increases of up to £33m this year. Vince Cable, the Liberal Democrat Treasury spokesman, said: "This is utterly ridiculous. The bonus culture is completely out of control. If anyone needs to be setting an example in relation to bonus payments, it's government departments and the FSA."

Mr Brown pledged to root out "irresponsible risk-taking, and irresponsible and excessive behaviour" in Britain's banks. He used a speech at Coventry University to declare: "They are stewards of people's money and they should not be speculators in people's money. What we have got to do now is to make sure that in the lending the banks do, that they are absolutely responsible. We will do everything we can to repair the banking system and make sure that people can have the confidence that is necessary for our economy to flourish."

George Osborne, the shadow Chancellor, blamed the Prime Minister. He said: "HBOS bankers like James Crosby bear a heavy responsibility, but so too does his ally Gordon Brown."

G7 menu As imagined by Sean O'Grady

Starters

Italian Berlusconi ham

with banker's capers and a subprime salad

Seasoned hash-Brown

Amuse-bouche

Ms Merkel's special pickle

Mains

Humble pie, green shoots and leaks

Debt à la toxique

Roast Darling served with a Moreno and Crosby morass

Yes We Canned essence of hope

To follow

Banker's Ramp

Chickening Out

Baked Obama



On the trolley

Raspberry fools

Mervyn's Surprise

Fred the Shredded Wheat

Sour grapes

Hard cheese

Smorgasbord of fiscal and

monetary policy options

Wines

Chateau Sarkozy 2007 (rather cheeky)

Bernie Madoff's New World in the Red (barely palatable)



Vat not charged; discretionary bonuses at 12.5%

Start your day with The Independent, sign up for daily news emails
Life and Style
A monstrous idea? Body transplants might no longer be science fiction
Science An Italian neurosurgeon believes so - and it's not quite as implausible as it sounds, says Steve Connor
Sport
Demba Ba (right) celebrates after Besiktas win on penalties
footballThere was no happy return to the Ataturk Stadium, where the Reds famously won Champions League
Arts and Entertainment
Natural beauty: Aidan Turner stars in the new series of Poldark
arts + ents
News
Mia Freedman, editorial director of the Mamamia website, reads out a tweet she was sent.
arts + ents
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
News
people
Arts and Entertainment
The write stuff: masters of story-telling James Joyce, left, and Thomas Hardy
arts + ents...begging to differ, John Walsh can't even begin to number the ways
News
Image from a flyer at the CPAC event where Nigel Farage will be speaking
news
2015 General Election
May2015

Poll of Polls

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Bookkeeper

£23000 - £26000 per annum: Recruitment Genius: This small, friendly, proactive...

Recruitment Genius: Photographic Event Crew

£14500 - £22800 per annum: Recruitment Genius: This is a fantastic opportunity...

Recruitment Genius: Software Developers - .NET / ASP.NET / WebAPI / JavaScript

Negotiable: Recruitment Genius: A Software Developer is required to join a lea...

Austen Lloyd: Corporate Tax Solicitor - City

Excellent Salary: Austen Lloyd: A first rate opportunity to join a top ranking...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower