Germany said on Thursday it was fully behind an EU-wide stimulus package aimed at pulling the bloc out of recession but insisted it would not follow others in "tossing around billions" to ease the crisis.
An EU summit in Brussels, while dealing with deepening economic problems, also aims to put the EU in the lead of the global fight against climate change. French President Nicolas Sarkozy urged leaders to set aside differences and agree on a package of moves to cut the bloc's emissions by a fifth by 2020 from 1990 levels.
The 27-nation bloc wants to agree on a 200-billion euro ($260-billion) stimulus package to avert a deepening recession, but Germany — the largest economy in Europe — has doggedly resisted calls on it to contribute much more than planned.
"We support the view of the (European) Commission that we need to provide 1.5 percent of GDP for the stimulus package to strengthen the economy," Merkel told reporters as she arrived for the two days of talks.
"Germany is aware of its responsibility as Europe's biggest economy and Germany will also look at what we may have to do," she said, repeating earlier suggestions it might top up a first national package worth 32 billion euros.
But Berlin remains at odds with others such as Britain on how to rescue a European economy heading sharply into recession after the worst credit crunch in 80 years, insisting it will not follow them with hefty cuts to value added tax (VAT) that would damage its budget.
In an interview with Newsweek magazine, German Finance Minister Peer Steinbrueck singled out British Prime Minister Gordon Brown for abandoning fiscal prudence and switching to policies that he said would saddle a generation with debt.
"The speed at which proposals are put together under pressure that don't even pass an economic test is breathtaking and depressing," Steinbrueck said in the interview, published on the magazine's website on Wednesday.
Britain is to pump 20 billion pounds into the economy to 2010 with tax cuts and 3 billion pounds of capital spending. Germany has cited plans worth 31 billion euros over two years but with a budget hit of just 10.9 billion euros to 2012.
EASE THE SHOCK
EU leaders aim to agree how to reach targets of slashing carbon emissions by 20 percent by 2020 and winning 20 percent of the bloc's energy from renewable sources such as wind and solar power by that date ahead of global talks next year on a successor to the Kyoto agreement from 2012.
The talks take on a particular importance, coming just over a month before Barack Obama takes over in the White House — a change in leadership many European leaders hope will produce closer cooperation on issues such as climate change. "Europe has no choice other than to reach agreement," said Sarkozy, who wants an accord on the climate package to crown his six months in the chair of the rotating EU presidency.
A French-backed proposal for a deal sought to ease the shock for heavy polluters by protecting steel, cement, chemicals, paper and other industries from the cost of buying permits to emit CO2 from the EU's flagship emissions trading scheme (ETS).
If that allays the concerns of countries such as Germany and Italy, negotiations will switch to bargaining with eastern European states over how much money they need to accept a proposal that will punish their coal-dependent power sectors.
Poland's demand for coal plants to get 70 percent of their emissions permits free in 2013, paying for them fully by 2020, had been accepted in the draft, seen by Reuters.
IRISH DEAL
EU officials are upbeat on chances of persuading Ireland to hold a new referendum next year on the Lisbon Treaty of EU reforms which Irish voters rejected in June over concerns about a loss of sovereignty and Irish influence in Brussels.
In the most explicit acknowledgement yet by Dublin that it could hold a new referendum, Foreign Minister Micheal Martin said such a vote could take place if Ireland won assurances on keeping a permanent seat on the European Commission and that its military neutrality would not be undermined.
EU officials are upbeat about chances of a deal with Ireland on holding a new referendum next year to ratify the Lisbon Treaty. The rejection by Irish voters last June stalled a project that needs the approval of all 27 member states.
Foreign Minister Martin said a draft accord circulated by France addressed Irish demands for a guarantee of one seat on the European Commission and that its traditional military neutrality would not be undermined.
"Work remains to be completed with our European partners over the coming months and any second referendum is conditional on satisfactory conclusion of that work," he said in the clearest reference yet by Dublin to a possible re-vote.
The draft document, obtained by Reuters, includes additional assurances on taxation policy, workers' rights and other issues which contributed to Irish voters' rejection of the treaty, and commits Ireland to ratifying the treaty by end-2009.
