Germany will not take part in a "senseless" international competition to spend billions of euros to boost flagging economic growth, Chancellor Angela Merkel said on Monday.
Despite heavy criticism from across Europe and even within her own conservatives for her cautious response to the global economic crisis, Merkel said she would not open any spending taps even though Germany faces its worst post-war recession.
In a speech at a party congress of her Christian Democrats (CDU) ahead of a general election next September, Merkel said Germany would closely monitor the economic situation and be ready to act fast if necessary, keeping all options open.
"We will not take part in a competition to outdo one another with an endless list of new proposals, in a senseless contest over billions," she said, a barb seemingly directed at France President Nicolas Sarkozy and his European Union presidency.
"That's not going to happen with us (CDU) and that's certainly not going to happen with me."
Sarkozy had criticised Merkel's lukewarm reaction last week to EU stimulus plans, saying: "While France is working, Germany is thinking."
With its solid fiscal position and its heavy reliance on exports, Germany has faced urgent calls from partners to do far more to stimulate growth and help restore economic confidence.
Merkel turned a deaf ear to that again on Monday. She spoke instead of Germany remaining committed to achieving a balanced federal budget within the next four years, and said its "social market economy" should serve as a model for other countries.
But the criticism kept coming.
"We need tax cuts now, and not 'at some point in the future'. Lower taxes now would be exactly what is needed. Our taxes are too high," Christian Baldauf, head of the CDU in Rhineland-Palatinate state, said in speech to delegates.
MERKEL SAYS NO QUICK ACTION
Merkel, who has managed to remain popular in opinion polls despite doubts about her response to the first real crisis she has faced since taking power in 2005, said again there would be no tax cuts until after next September's federal election.
"What we will not do is introduce any immediate measures to stimulate the economy for a limited period of time instead of working for a structural tax reform," she said, an indirect dig at British Prime Minister Gordon Brown's plan to temporarily cut value-added tax.
Many economists have said it makes little sense to rule out tax cuts now, as the crisis unfolds, yet promise them later on.
Merkel, who received the CDU's traditional five minutes of applause from the 1,000 delegates, has faced withering attacks in the last week, even from some of her most loyal backers, for refusing to consider any immediate tax relief.
Werner Schnappauf, managing director of the BDI industry association, and Hanns-Eberhardt Schleyer, head of ZDH, the skilled workers' lobby, appealed to Merkel to change course.
There was further bleak economic news on Monday when the German plant and equipment makers' association VDMA said engineering orders fell 16 percent in October on the year.
Germany's powerful car industry, including Stuttgart-based Porsche AG <PSHG_p.DE> and Daimler <DAIGn.DE>, have also been hit hard. Daimler is discussing cutting the work week to below 30 hours in January, while Porsche plans to shut for seven days in that month.
Last week, Finance Minister Peer Steinbrueck said the economy could contract by as much as 1 percent in 2009, which would be the deepest recession since modern Germany was founded in 1949 from the rubble of World War Two.
German gross domestic product (GDP) shrank by 0.5 percent in the third quarter from a year ago.
Merkel said her government would be ready to act fast to counter the threat if necessary. She reiterated that leaders in her grand coalition would meet on Jan. 5 to review conditions.
"Germany will continuously be analysing the situation anew," she said. "Germany will keep all its options open to try to effectively fight against the consequences of the worldwide crisis — and I'd like to emphasise all options.
