Merkel vs Obama Ahead of G20

The next G20 summit meeting is due to commence in a matter of weeks, on the 2nd April.  Ahead of this, world finance leaders met in southern England to discuss key topics.  One which was causing more than a slight headache was a few miles away, in London.  Angela Merkel, the German Chancellor, has openly been rejecting global plans for greater fiscal stimulus, lead by US President Barack Obama.  Speaking from London in her third rebuff in as many days, Merkel said that "Germany really has contributed its share" to the global crisis.  On the 1st March, she already rejected bailout aid to Eastern Europe.

So what has Germany done so far in its fight against the recession?  Since late last year, it has implemented 100 billion euros to boost liquidity for companies, and a further 82 billion in other measures, including the encouragement of the purchase of new, energy-efficient vehicles by offering premium to scrap old ones.

Germany's relative strength in current times has meant that other countries are being seen to rely on this.  While the economy there has been predicted to shrink 2.3 per cent this year, it is the speed at which it is likely to recover that is giving it status as a beacon.  According to the EU, Merkel's stance on tax cuts and emergency spending has amounted to 3.3 per cent of GDP.

While Japan and the US believe that more cash injection will boost the global economy - which is set to shrink for the first time since World War II - Germany and France will argue that now is not the time to spend more money.  Merkel has said that it is now key to introduce and set a regulatory system which will prevent this kind of "economic catastrophe" from being repeated.  She called for more "transparency of financial markets" during the speech, which was seen as a direct attack of Obama's administration.  Obama's response was to try and compromise: more stimulus yet also more regulatory reforms.  So far, Obama's administration has passed substantial boosting, last month seeing $787 billion put into place.  That, so far, is more than the 27 EU countries who have put forward around 400 billion euros.

But while some are critics of Merkel's stance, and say she risks deepening the global recession, others have said that it is her approach which will create a speedier return to more prosperous times.  Germany used the principle of monetary stability to build its postwar society, and has become Europe's largest economy as a result.  So is it a case of underestimating the size of the crisis or a tough but worthwhile measure that will give better results in the long run?