Finance ministers and central bankers from the Group of 7 leading economic powers — including the U.S. — are holding informal talks about the global economy in a stately home north of London today. But their fireside chat may not be too cozy. Germany’s finance chief is in for roasting over the hot topic of austerity.
The U.S. will lead the onslaught, urging the Germans to go for growth and ease up on austerity and slacken their demand that debt–laden euro zone countries cut their public spending. France will join in the Germany bashing and the new, anti-austerity Italian finance minister will add his voice to the small chorus of criticism.
But the Germans insist that the criticism is misplaced. They’ve already shifted ground. With Germany’s blessing, France and Spain have recently been given an extra two years to cut their budgets. German analyst Constanze Stelzenmueller says German policy has been misunderstood.
“In all fairness, Chancellor Merkel would say this is not just about cutting debt or austerity. It’s about structural reforms to labor and services markets in order to enable growth,” says Stelzenmueller.
Germany does have at least one ally at the meeting in Britain. Yesterday, Prime Minister David Cameron said, “We need to go on cutting our deficit — but at a sensible, measured pace.”