Gordon Brown's plans to soften the impact of recession have been denounced as "crass" and "breathtaking" by the German Finance Minister.
Peer Steinbrück triggered a diplomatic row with Britain on the eve of today's European economic crisis summit as he accused the Government of "tossing around billions" and saddling a generation with debt. He scorned the Prime Minister's decision to cut VAT and boost investment on public projects at the cost of increasing national debt to £118bn next year.
Dispensing with the usual niceties of diplomatic language, he questioned the wisdom of following the philosophy of economist John Maynard Keynes of using public cash to stimulate the economy. "The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking," he told Newsweek magazine.
"When I ask about the origins of the [financial] crisis, economists I respect tell me it is the credit-financed growth of recent years and decades.
"Isn't this the same mistake everyone is suddenly making again, under all the public pressure?"
Mr Steinbrück went on to question the effectiveness of this month's VAT cut from 17.5 per cent to 15 per cent:
"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 generation to work off," he said.
European Union leaders will today begin debating a €200bn (£175bn) fiscal stimulus package supported by Mr Brown with the backing of Nicolas Sarkozy, the French President, and José Manuel Barroso, the European Commission president. Their stance – discussed at a Downing Street meeting on Monday – had already attracted Mr Steinbrück's ire when he accused other European leaders of behaving like "lemmings" in response to the crisis.
The comments of Mr Steinbrück, a Social Democrat, may not necessarily be shared by the German Chancellor Angela Merkel, who is a Christian Democrat, but they will raise the diplomatic temperature at an already difficult summit, which will also discuss climate change.
George Osborne, the shadow Chancellor, said the comments "totally demolished Gordon Brown's central political charge that only the Conservatives oppose his expensive and ineffective VAT measures".Reuse content