Germany fights off US attacks on moves to cut deficit

Germany has rejected criticism that it is endangering its economic recovery with austerity measures.

Finance minister Wolfgang Schaeuble said the government had a "well-conceived" exit strategy from its stimulus spending and could not understand the view that Germany was "wrecking the recovery with austerity measures".

"There is an implicit accusation that we're not living up to our international responsibilities as far as economic policies are concerned," he wrote in a newspaper column ahead of the G20 summit this weekend in Toronto.

"I cannot understand this argument because Germany has taken sweeping measures since 2008 to stabilise the economy. We've done that on top of all the automatic stabilisers we have (such as higher social welfare spending) that play a much smaller role in countries from which we're now being criticised."

Germany is planning to make cuts worth 80 billion over the next four years, a package it hopes will bring the structural deficit of Europe's biggest economy within EU limits by 2013.

US Treasury Secretary Timothy Geithner and White House economic adviser Lawrence Summers said on Tuesday that G20 countries should not risk undermining growth for the sake of cutting deficits.

But Schaeuble pointed to Germany's budget deficit climbing to 5% of GDP as evidence of its commitment to growth-boosting measures.

"It's true that an abrupt and ill-conceived exit from the stabilisation measures could endanger their success. But a credit-financed stimulation of demand cannot become a permanent, drug-like fix," he said.

"We need a well-conceived exit strategy. The German government has one. The first consolidation measures won't take effect until 2011 and amount to less than 0.5% of GDP. There's no way that can be called hitting the brakes."

Germany has vigorously defended its plans to pursue its savings measures after President Obama preached patience in clamping down on public spending.

Chancellor Angela Merkel dismissed criticism in a TV interview, saying she told Obama in a phone call that Germany had done much to support economic growth with stimulus measures.

"Germany is doing much more in 2010 for the worldwide economic recovery than (other countries) on average," she said.