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Brown bail-out suffers a Berlin blitzkrieg
Joe Murphy, Political Editor11 Dec 2008
GORDON Brown was today forced to defend his economic masterplan from a surprise attack by the Germans.
In scornful comments that angered Downing Street, German finance minister Peer Steinbruck derided the PM's fiscal stimulus as "crass Keynesianism" that would saddle Britons with debt for a generation.
He went on to ridicule the 2.5 per cent cut in VAT, which was the headline anti-slump measure in Alistair Darling's recent pre-Budget report.
"Are you really going to buy a DVD player because it now costs £39.10 instead of £39.90?" he jeered in an interview with Newsweek.
"All this will do is raise Britain's debt to a level that will take a whole generation to work off."
The comments came as Mr Brown was flying out to an EU summit in Brussels, where the agenda was dominated by efforts to co-ordinate a £200 billion Europe-wide stimulus to beat the recession.
A Labour MP called it "a rant" while diplomats suggested it had more to do with domestic German politics than with the merits of Mr Brown's policies. Mr Steinbruck raised VAT and his party is terrified of being punished in looming elections, giving him a strong motive to rubbish a country which has done the opposite. But the raspberry from Berlin was a gift to the Conservatives, who said it blew apart Mr Brown's claim he commanded global support. The row erupted a day after the Premier's slip of the tongue, in which he boasted of having "saved the world".
Mr Steinbruck could not have been more outspoken. "Our British friends are now cutting their value-added tax," he said. "We have no idea how much of that stores will pass on to customers."
He mocked the change from Mr Brown's espousal of prudence to a debt-funded recovery plan. "The same people who would never touch deficit spending are now tossing around billions," he said. "The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking."
Mr Brown is expected to get a more sympathetic response from German chancellor Angela Merkel when he lands in Brussels for a dinner of the 27 EU leaders tonight.
Mrs Merkel leads a grand coalition in which her CDU colleagues sit uneasily alongside Mr Steinbruck's SDP But she dismissed the VAT cut as "inappropriate for Germany" last month and is rumoured to be at loggerheads with other leaders.
Downing Street sources dismissed Mr Steinbruck's comments, saying that Germany "was in a minority position and out of step".
France recently announced plans to spend £25 billion to beat the recession, and the European Commission wants Europe's major economies to spend £200 billion between them.
Reader views (41)
I do not understand why our biggest banks have been bailed out while opperating illegally! I note that two of the main Banks coming to the table with their begging bowls are Scottish based banks? is this one of the reasons they were bailed out GORDON?
If any PLC ran up such huge debts, they would be sent into adminestration, yet the banks can have a lifeline and what frankly stinks that in most cases the same management structure is still in place? That could never happen in private companies. The directors would not be looking forward to their next big Bonus, they would and should be looking for a job they are possible better able to handle, as it is clear they have no idea how to run financial matters...but Santa Gordon and Darling are there to look after you. The new slogan should be "Be Scottish and get More" and by the way these comments are not just directed twords the Scottish people the apply equally to Northern Rock and any other bank badly run by mannagement who were out of touch and certainly not doing their Jobs
- Bernard O'Brien, Blackpool, Lancashire, 12/12/2008 07:20
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He must have misunderstood his instructions from his EU bosses and they chastised him for it. Either that or he was trying to think for himself for a change - and screwed it all up anyway.
(Have I mentioned that I am not GB's greatest fan?)
- Rogan, Irving, 11/12/2008 21:22
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One major advantage the germans have is that they dont have a clown ruining their capital.
- Melvyn Windebank, Canvey Island, Essex, 11/12/2008 19:30
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I always felt that for incompetence and deceit we had reached the bottom of the barrel,with Blair, and,it was impossible to go any lower, I was wrong! I also think that without an early solution to the economic problems, (what hope,with the current bunch in charge!)the problems we are witnessing in Greece is a prelude to what will happen on a much wider scale throughout Europe!
- Kevin Sullivan, Roehampton, London., 11/12/2008 19:07
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Peter Pirot is absolutely correct. A lot of Scots do possess an uncanny amount of financial acumen.
As in common with the rest of the UK, most Scots want nothing to do with Brown and his Darling. Keep them in England where they can wreack more havoc.
Our saving grace in Scotland is we have some politicians - who are by no means perfect, but are a lot smarter than those two 'dunderheids' in 10 & 11.
What the hell did the UK do to deserve the last eleven years inflicted upon it
- C. Y. Inical, Angus, Scotland, UK, 11/12/2008 17:21
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The EU is disintegrating.Greece has serious rioting.
Eastern Europe members rejected ECO plans for their vital coal production; The Irish are under the cosh to hold another referendum and Gordon Brown has to eat humble pie over his VAT floperoo from a German minister.What price UNITY and how can we save the world from Gordon Brown and his EU cohorts
- Alex Pomeroy, london, 11/12/2008 16:31
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Crash aaaaaaaaarrrrrrrrrggggggghhhhhhhh Saviour of the universe!
- Bruce, London, 11/12/2008 16:15
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Congratulations to the Germans. It is about time someone pulled lunatic, "I will save the world" Brown's mad plans to pieces. He has done more everlasting damaged to our country than the Luftwaffe,
- Albert Hall, hove england, 11/12/2008 15:23
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clearly the majority of comments here are very much against Brown/Darling's handling of the economy. However the poll in the Times yesterday put Labour 9% ahead of the Tories on managing the UK economy.
Either the polls are wrong OR people are just stupid OR Cameron/Osborne have not convinced many of their competance....I suggest it is the latter. Lots of people in thsi forum wanting rid of Brown but not many seem to be actively promoting alternative Tory policies OR actually aware of what they are....
- Martin_Clerkenwell, london, 11/12/2008 15:21
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"Germany was always out of step with Europe and feel superior to the likes of us. Brown is right and the majority of European countries know this." And I always thought Wales was just down the M4, not on another planet altogether! I'll have half of whatever Denis Regan's on......
- Paul, London, 11/12/2008 15:11
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Some comfort here then, well said Her Steinbruck !
We are still left with the GB pollsters still leaning towards the Darling Brown World solution, oh dear, or is it me ?
- Brian Hughes, wales, 11/12/2008 15:08
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Brown is Plonker however you view him.
Simply he has no idea-i believe he should use Northern Rock to kick start the economy by placing all these funds into a separate mortgage lending account with a fixed rate of say 3% with a commercial separated Lending committee to advance 80-85% against purchase prices immediately.
This will kick start every sector of the economy and sideline the banks into considering their own positions.
This sorts his problem out with the Banks not utilising taxpayers monies as expected but which were not directed by the Plonker when he put the money in.
Good for the Germans speaking out-pity not more outsiders did this.
- Harvey Lawrence, london, 11/12/2008 14:48
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Brown a financial wizard !!!!!????? Y'know what ! - if I had managed my personal finances like Brown has managed the Country's finances over the past 11 years, I would be sitting on the pavement with a tin collection box, a dog on a bit of string - and asking passers buy if they had any loose change.
- Alan, Essex, 11/12/2008 14:30
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The best way out of our troubles would be to repeal all Nu-Labour and now Nu-Old-Labour legislation. Unfortunately it would cost the Exchequer too much and could not be done but we would be much better off not having had Labour of any description.
- William, London, 11/12/2008 14:04
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"They think it's all over...it is now"
- Ged, Lee, London, 11/12/2008 13:51
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I bet Gordon Brown (You know the unelected
one) choked on his porrideg when he heard another guy with the title of chancellor. The german equiv, of Brown when he was chamcellor. Gave his verdict on the so called Brown stimulas. His verdict short version (it's a crap solution). Which will lead to higher taxes to pay for it. Taxes will have to go even higher alonside those payback the borrowing taxes, to enable them to keep giving wage earners money to all the free loaders being currently supported by this lot in power.
- Ebin Donk, yo1 6ds, 11/12/2008 13:48
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Denis Regan, Cardiff ,wales
So for you, the Son of God Brown saved the world! Germany is the strongest economy in Europe and has the largest Manufacturing sector in Europe and a finance centre which rivalled London. The Germans who do not have the burst mortgage bubble are talking nonsense and Brown the Son of God is right! Debt of any kind is bad for whatever reason it is created. If you want to see what Brown billlions are going to do just see what his billions sunk into NHS has done? The Great Ormond Street Hospital is begging for £3 a month in its TV advert and my local hospital services have gone from bad to worse.
- Norman, LONDON, 11/12/2008 13:39
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Most intelligent Scotsmen have a reputation for financial acumen and prudence. Why, then do we have at the helm the only two Scotsmen alive who understand nothing about money?
Peer Steinbruck is quite correct. The Germans have proved far more capable of managing their economic affairs than we have. The learn from experience, having seen the effects of hyperinflation in the twenties and also the false dawn of the Keynesian "borrow and spend" policies of the National Socialists before the war. The Nazis repaid the borrowings mainly from gold reserves abstracted from the vaults of subsequently occupied countries. Broon and his fellow-scunners do not have this option, as Steinbruck has accurately, albeit tacitly, analysed.
- Peter, Pirot, Serbia, 11/12/2008 13:24
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Ask for elections NOW, vote Tories and Lib Dems in as coalition, chuck Labour into the Pacific for ever (no, not the Atlantic, they might swim back).
- Ab, London, 11/12/2008 13:06
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Hmmm. Labour policy since 97? Make Thatcher look like a wet liberal, sell the country to the financial sector, spend the gazzilions of OUR money aimed at the public sector on unaccountable private consultants and shadowy private contractors instead and then determine that the way out of our very own unique, self-induced, non-global recession is to bankrupt the country.
I am at the point whwere I cannot beleive these people - Brown and co - can be really such idiots. Is it actually a secret Scottish plot to bring England to its knees? You gotta wonder!
So yes, the German finance minister is talking sense. Can he come and stand for election here please?! Failing that - Ich will lieber im Deutchland leben
PS Want a laugh? My husband works for a shiny new 'Academy' and they are working out how to srtucture the bonuses for the senior management team (not for the actual teachers of course). What did they decide? To look at how the banking and gambling sectors do it!!!!!!! Jesus wept.
- Lewis, London, 11/12/2008 13:06
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It was fun to see one of Labour's Mad Dogs,Robert Peston, savaging Hr Steinbruck yesterday.Obviously Labour's confidence trick won't work if people with a solid reputation go around telling the truth.Patently 2.5% off VAT means nothing when Woolies and Tesco are slashing prices by 50%
- Jeremiah, London, 11/12/2008 13:01
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The difference with Germany of course is that we do NOT have a big succesfull economy anymore, we have been NOT been lowering our overall tax burden, we are heavily indebted and unprepared for this downturn, we have an UNELECTED government, we have NO diversified economy but are heavily dependent on the state machine...
- Georgie, Islington, London, 11/12/2008 12:58
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Brown has got it wrong on every decision. Yet boasts of his success. He made a boom and bust. He changed RPI to CPI to make himself look better, as it showed lower inflation with no housing. Result lower interest rates and a huge boom in house prices.
Brown's boom, when he was boasting..'no boom'. How arrogant, and completely out of touch, and wrong.
Now the huge Brown Bust. We want a full apology for the complete cock up of the UK finances, including taking £150 BN from pensions.
Brown is a financial illiterate. Any fool can borrow. Mandy is pushing the PR spin (lies and deception).
We want a full apology from Brown.
- Jock, glasgow, 11/12/2008 12:42
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Glad to see the Germans are finally on our side!
- Nobby Clark, Perth, Scotland, 11/12/2008 12:12
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I know of several small and large companies who have borrowed and spent to get out of trouble which has failed. It is a policy that does not work. There are better and safer ways of saving a company or country, getting further into debt is no solution.
- Derrick Mellor, Chesterfield. UK, 11/12/2008 12:08
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The Germans don't need to care about the British econonmy their's is much bigger and stronger than ours in the first place.
- Alastair J S Adams, Worcester Park, Surrey, 11/12/2008 12:04
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The Germans have a point – the budget deficit was too high before the credit crunch and the projections are frightening. The markets have given their verdict on the proposed plans, the sever fall in the Pound and I fear we will hit parity with the euro before long. The VAT reduction has not made a jot of difference to spending plans, and merely added to retailers woes and costs as they had to change their prices and computer systems. To get out of this recession we have to look at what will actually encourage companies to take on staff. The current employment legislation is a nightmare, and is an significant disincentive to employers working in the UK. In addition the general rules on taxes are also too complex and uncompetitive. This has been realised, after some companies left the UK, but more need to be done. Finally, the balance between the numbers employed by the Public sector (in all its guises) and employed by the private sector has to be addressed. For the 10 or so years, the cost of the Public sector has ballooned and is no longer affordable – if it ever was.
- Jeremy E, London, 11/12/2008 11:52
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Germany was always out of step with Europe and feel superior to the likes of us.
Brown is right and the majority of European countries know this.
- Denis Regan, Cardiff ,wales, 11/12/2008 11:52
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Germany and several other european countries are not in the same position as the Uk as they have not had a housing sector bubble. Home ownership levels are low and savings rates are typically high. There is not a direct comparison - eurozone countries that have had housing bubbles are more in line with the UK's position eg Spain...
the reduction in VAT rate is the most efficient means of passing on a tax break to encourage spending as it is the only tax related to expenditure........2.5% was the figure chosen as it was againt EU law to go below a certain level.
- Martin_Clerkenwell, london, 11/12/2008 11:41
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Peer Steinbruck is spot on. I wish we had him rather than Dumb and Dumber.
- Dave Davies, Basingstoke, 11/12/2008 11:38
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Thats Mr Steinbruck arrested soon then. Have labour got their own international police farce like the Met?
- Tt, Norwich Norfolk, 11/12/2008 11:36
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Mr Steinrbuck is spot on.
It was obviously ludicrous to cut VAT. If noone has any money to buy, it makes no difference what the VAT rate is.
They should have abolished Stamp Duty on house sales so that even those in enforced sales would have saved significant, important cash, and it would have had a knock on effect on everyone - estate agents, solicitors, shops, builders, removal companies - all of whom instead are shutting down businesses, laying off staff and creating a massive domino effect in the country.
Any fool could see this. But then Brown and Darling are no ordinary fools. They have set a new standard for blinkered vision, stupidity and incompetence.
What will be interesting is to see international investors shun British Gilts making it impossible for Brown to fund this borrowing binge, and then Peer Steinbruck will be proved absolutely right but only after huge damage has been done.
When the Tories say this, they are mocked and ridiculed!
Personally I would trust a German any day when it comes to sound finance.
- Mikey, Guildford, 11/12/2008 11:25
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The ARCHITECT of our FINANCIAL ARMAGEDDON, rather than his self proclaimed SAVIOUR OF THE WORLD is the truth about BOOM BUST BROWN. He is the most incompetent and arrogant PM ever to be inflicted on this once great Britain. Sadly the clown in the picture has probably a better chance of turning our economy around than Brown the Clown. He has plunged us into a financial black hole that will swallow the wealth of the next two generations.
- Richard K, Nottingham, 11/12/2008 11:22
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Taking a minority position and being out of step doesn't automatically mean you are wrong - it just requires more courage! I'm sure many a banker now wishes he had been out of step with respect to subprime debt.
- David, Lewes, East Sussex, 11/12/2008 11:13
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Steinbruck. Spot on.
Do you honestly think this will stimulate spending because a slight reduction in VAT. Assuming retailers pass on the reduction, do you expect increased spending to save a mere £2.50 for every £115 spent and thats not on staple food.
- Asw, Hong Kong, 11/12/2008 10:47
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It's not an attack, it's an expression of his opinion in response to a question. By contrast Ed Balls has attacked Steinbruck saying that somehow this is a tactic to divert the Germans' attention from their own problems. Since when have the Germans really cared about the British economy? Ed Balls, the great intellect of our times.
- Chuck Unsworth, London, 11/12/2008 10:36
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Herr Steinbruck is wrong.
I distinctly heard Gawd Brown say that we were better placed than anyone else, and, yesterday he modestly confessed he had saved the world.
Gawd is never wrong - just ask him.
- Anglo, Sussex UK, 11/12/2008 10:27
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The Germans make sense. In addition, Brown has decided to let hundred of thousands of illegals stay in the UK, thus diluting the labor market and a bigger drain on the social system. How stupid can a government get. Where is the promise to tighten up immigration> Where is the promise to let us vote on the EU. We have no voice--only empty promises. But how can we get the bloody man out? He is like a leach. Government has a big mouth but NO EARS
- Bernard, London, 11/12/2008 10:17
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Borrowing to pay a way out of recession only works if you have real reserves in the country, and we don't.
If the 'fiscal stimulus' was directed to wealth producers rather than consumers, borrowing might work.
As it is, a 'consumer giveaway' to buy foreign goods from foreign shops served by foreign workers, will only serve to drive the run on Sterling even faster.
We're heading for massive inflation thanks to the increased cost of our imported goods and materials.
- Cap, London, 11/12/2008 10:07
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Well he is right about VAT. Should have left it alone, it costs more to implement price changes than will be seen in returns.
- Frank, Home Counties, England, 11/12/2008 09:57
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Mr Steinbruck merely states what millions of us think anyway, but how can we stop him?
- Roger, Surrey., 11/12/2008 09:46
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