Osborne backs Merkel over Darling
By Liz Stephens
Shadow chancellor George Osborne backed the economic recovery policies of France and Germany over those of Alistair Darling today as a rift emerged between the chancellor and the prime minister.
This morning, Mr Darling warned that financial recovery could be thrown into jeopardy by European complacency.
In an interview with The Independent before a meeting of the G20 finance ministers in London on the weekend, he aimed a warning directly at France and Germany, who are already contemplating putting an end to measures to stimulate their economies.
The Conservatives then accused Mr Brown of being in “complete denial” over the $1.1 trillion cost of the bailout and out of step with France and Germany.
Shadow chancellor George Osborne, said: “While the rest of the world is facing up to the need to deal with their budget deficits, the British government is still in complete denial despite having the largest deficit of all,”
Mr Osborne attacked the chancellor’s call for world leaders to continue with stimulus packages to ensure growth saying: “He says that he expects, as we do, that Britain will come out of recession this year – and yet he wants to go on with large increases in public spending next year, when he knows the country cannot afford it.”
However, earlier in the day – and at the same time as Alistair Darling’s warning shot to France and Germany – Gordon Brown issued a joint letter with Nicholas Sarkozy and Angela Merkel to Swedish Prime Minister Fredrik Reinfeldt, sending a “strong joint message”.
This statement of unity led some to speculate whether the chancellor is ‘on message’.
France and Germany have returned to growth ahead of Britain and America but Mr Darling insisted that all governments must continue to spend to ensure the global economy fully recovers next year.
“My view is that the biggest single risk to recovery is that people think the job is done,” he said.
“There are encouraging signs that the joint action we have taken in the last 10 months or so is having an effect.
“It is a bit early to say ‘How do we get out of this?’ You must have a plan that allows you to exit in a way that is consistent with allowing the economy to grow again. Don’t for goodness’ sake get out of them before you have completed the job.”
However, in today’s letter ahead of the G20 meeting in Pittsburgh later this month, Gordon Brown formed a united front with Nicolas Sarkozy and Angela Merkel, and appeared to show consensus over stimulus packages and bankers bonuses.
“While cyclical indicators point to economic stabilisation, the crisis is not over and the labour markets will suffer the consequences of low capacity utilisation over the months to come,” the leaders wrote.
“Together we must send a message from Pittsburgh that we are fully and firmly resolved to implement our stimulus plans.”
France and Germany have also called for further crackdowns on banking bonuses and risk-taking. UK and US banks would be most affected by these plans because they tend to be bigger than European banks and is believed that this has been a source of behind the scenes tension in the UK and US.
Speaking ahead of a Cabinet meeting at the London Olympics site today, Mr Brown again appeared to side with his European counterparts.
“It’s time to say that we are never going to go back to the old ways,” he said.
“Those people who expect that things can be back to normal will not have that. The bonus culture has got to change.”
Last month, Mr Darling said he remained unconvinced by the idea of a cap on bonuses.
Meanwhile, the chancellor’s budget forecast of 1.25 per cent growth next year – which was criticised in April for optimism – is expected to be confirmed as achievable by the International Monetary Fund next week.
But according to the Organisation for Economic Co-operation and Development (OECD) predictions released today Britain will still emerge from recession later than other developed nations.
