Cheap Money

Amazing, the German chancellor, Angela Merkel, talking about the Fed's funny money. Maybe she still remembers Weimar Republic and its hyperinflation.

Angela Merkel, the German chancellor, turned the tables on her international critics on Wednesday by accusing the US and other governments of making “cheap money” a central tool of their economic management, thus planting the seeds of a similar crisis in five years.

“Excessively cheap money in the US was a driver of today’s crisis,” she told the German parliament. “I am deeply concerned about whether we are now reinforcing this trend through measures being adopted in the US and elsewhere and whether we could find ourselves in five years facing the exact same crisis.”

Ms Merkel’s comments came as the European Union proposed a €200bn economic stimulus plan aimed at avoiding a deeper recession through tax and infrastructure plans. There were immediate doubts as to whether member states would back the measures.

The proposals envisage the EU’s 27 states contributing about €170bn with the European Commission and the European Investment Bank providing the remaining €30bn, partly through accelerated spending programmes.

“Angela Merkel and other conservative leaders such as [Italian premier Silvio] Berlusconi may well water down the plan and refuse to make the necessary national investments,” said Poul Nyrup Rasmussen, the former Danish prime minister who heads the Socialist party in the European parliament.

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