PM and Merkel discuss economic deal

Jan 15 2009

Efforts to secure a global response to the economic downturn are set to dominate talks between Gordon Brown and German Chancellor Angela Merkel.

The Prime Minister, who on Wednesday night met with French President Nicolas Sarkozy over dinner in Paris, is trying to lay the ground for agreement at a meeting of the G20 in London in April.

He departed for the brief tour as his Government unveiled a multibillion-pound package aimed at unblocking lending to smaller firms - on one of the worst days for UK jobs in years.

But the measure was overshadowed by a minister's claim to have seen some "green shoots" of economic recovery. This sparked opposition claims that Labour was out of touch with the reality of the recession.

Business minister Baroness Vadera later said she was sorry if her comments had been misinterpreted and insisted there was no complacency on the part of the Government in tackling the crisis.

The Prime Minister has conceded that, without co-ordinated action across the globe, the recession could last two years. He is also keen to secure a deal at the G20 gathering which he will chair.

Chancellor Merkel's governing coalition agreed a £45 billion fiscal stimulus package on Monday, including infrastructure investment and tax relief.

Preliminary figures have shown that growth in Germany, Europe's biggest economy, was more than halved last year to 1.3% as the slowdown hit exports and the country went into recession.

Tensions were raised between London and Berlin late last year after German finance minister Peer Steinbruck criticised Mr Brown's own package as "crass Keynesianism".

The PM dismissed the concerns at the time as the result of internal German politics and insisted the EU was united in its approach.