France and Germany distanced themselves on Monday from a British plan to cut sales taxes in an effort to boost its economy, saying they preferred targeted aid that would encourage investment and help certain industries.
But speaking after a joint cabinet meeting, French President Nicolas Sarkozy and German Chancellor Angela Merkel showed no sign of having patched up their main differences on an EU growth package, with Berlin reluctant to back much new spending now.
Sarkozy told reporters that both countries were determined to support European industry and said France would not abandon its ailing car sector, which is struggling with slumping sales.
"We are well aware of the responsibility of France and Germany to lead Europe to the path of unity," said Sarkozy, whose country holds the rotating EU presidency.
But Sarkozy and Merkel appeared more certain about what ideas they did not like rather than what specific measures they felt were needed to reboot the European economy.
In particular, they ruled out copying British plans leaked to the press for a temporary reduction in sales taxes to boost consumer spending before Christmas.
"A general decrease in value-added tax is perhaps the answer for some countries, but for Germany and France, it is not," Merkel said, before Sarkozy added that a VAT cut would not be the right response to the price falls currently taking place.
Sarkozy said the two biggest economies in the euro zone preferred to see money spent on investment, innovation, research, schools, education and training.
"I think I can say with the support of Angela Merkel that we would make that choice, which doesn't mean we're passing a judgment on the others. They may have different ambitions," he said.
The European Commission is due to unveil its own ideas this week for how the 27-nation bloc should tackle the recession, including a likely suggestion that states contribute about 1 percent of the bloc's gross domestic product to fund measures.
Germany has given a lukewarm reception to some of the plans and French officials have expressed irritation over Merkel's reluctance to throw more cash at an economic stimulus programme.
Sarkozy has previously quipped that "while France is working, Germany is thinking", but on Monday he sought to play down the remark, saying France had a centralised government that made decision-making easy, while federal Germany needed much more time for consultations.
"There is more convergence than divergence, much more," he said, speaking of Franco-German coordination.
Merkel, however, said the figure of 130 billion euros ($160 billion) cited as the size of the EU growth package was a rough estimate and Germany had already earmarked much of its share, indicating that Berlin was not keen to support extra spending.
Germany fell into a recession in the third quarter of the year but economists fear the worst is yet to come as businesses rein in investments and nervous consumers curb their spending in anticipation of a deep downturn and job cuts.
France has just managed to avoid slipping into a recession, but economists expect a sharp economic contraction in the fourth quarter and a gloomy 2009.
