Her position flies in the face of a new World Bank report projecting global economic growth to shrink by 1.7 percent in 2009 – the first such contraction since World War II. The Paris-based Organization for Economic Cooperation and Development expects a 4.3 percent decline in growth for its 30 members.
But Merkel, diplomats say, has combined a profound German instinct against debt – and its accompanying inflation – with a widely held sentiment here that the US and Wall Street are to blame for creating the global crisis. Ahead of German elections in September, the chancellor is also arguing that Europe's social safety net already constitutes enough of a stimulus and a higher percentage of debt than what's been offered by the US and Britain.
"We were living beyond our means," Ms. Merkel said at a meeting March 28. "After the Asian crisis and after 9/11, governments encouraged risk taking in order to boost growth. We cannot repeat this mistake."
Merkel told The New York Times this week that she had practical as well as philosophical reasons for her views. A "massive demographic change" in coming years will shrink Germany's population, she said.
Angling for a 'free' ride?
Diplomats, economists, and officials in Berlin, Paris, and Washington disagree on how Merkel's instinct for discipline, order, and accountability will play out in London. Some argue that Germany will be "more flexible" on stimulus, if the US fully digests the European view on regulation. Others feel her game plan is hardheaded "beggar thy neighbor" competition, relying on stimulus promised by others to boost a German economy now 40 percent based on exports. A global economic uptick by the end of summer would no doubt help Merkel in September's election.