Brown repeating cheap credit mistakes, says Merkel

In a move that sets up a bruising EU summit in Brussels next month, Mrs Merkel also appeared to criticise Britain's VAT cuts and his calls for a huge "fiscal stimulus" to ease the downturn. Shadow chancellor George Osborne today seized on her remarks saying: "It's not just the British Conservatives who are concerned about the risks we are running with the future."

The German Chancellor accused the UK and America of repeating the mistakes that led the world into its credit chaos. "Excessively cheap money in the US was a driver of today's crisis," she said. "I am deeply concerned about whether we could find ourselves in five years facing the same crisis."

Mr Brown claims his £20 billion package of tax cuts and spending rises, funding by an unprecedented increase in borrowing, is vital to kick-starting Britain's economy. He suggests every country is following the UK's lead. But Mrs Merkel and French President Nicolas Sarkozy rejected a British proposal this week for an EU-wide VAT cut.

Steffen Kampeter, Mrs Merkel's budget expert, attacked the "hectic" crisis management in America and Britain, adding: "How good is a policy package if it has to be changed every other week?"