Budget Debates

The second day of the Bundestag's budget debates centered on a speech by Angela Merkel, who laid out the principles behind the budget and admitted that the immediate economic and financial outlook was gloomy.

"2009 will be year of bad news," Merkel said. "That's why we're building a bridge so that things will get better by 2010 at the latest."

She also responded to criticism that the budget proposed by the governing Conservative-Social Democratic grand coalition does little to stimulate the economy, compared with plans envisioned by other nations such as the US and Britain.

Merkel said the 480 billion euros ($625 billion) in financial injections and guarantees for banks was a sufficient stimulus, but that banks had yet to avail themselves of the money.

"Confidence between banks is still not at the level that it should be," Merkel said. "It is the responsibility of financial institutions to give loans to companies that need them."

The German government made the funds available this fall in response to the global financial crisis that virtual froze lending between financial institutions.

But Germany's opposition parties say the government's response to the crisis, which has led to economic recession in Germany, was woefully inadequate.

Weird outsiders

The business-friendly Free Democrats took Merkel's government to task for ruling out the sort of tax breaks Britain, for instance, hopes will encourage consumer spending.

"In Europe, people are doing what the liberal opposition is demanding," Free Democrat leader Guido Westerwelle said. "The truth is that, with your policy of not lowering taxes, you're the weird outsider in Europe."

The Greens, too, said Merkel's approach was too negative.

"You nickname in Brussels is 'madame non,'" quipped Green parliamentary leader Renate Kuenast.

Meanwhile, the Left Party blamed privatization for Germany's current economic woes and said social programs should be prioritized.

"Mrs. Chancellor, as long as you're of the opinion that small government is a worthwhile goal, you might as well not hold your education summit," said Left Party parliamentary leader Oskar Lafontaine.

Acting on recommendations from economic experts, the governing grand coalition has abandoned its policy of state financial consolidation and included 18.5 billion euros ($24 billion) in deficit spending in its proposed 2009 budget.

But Merkel and her Social Democratic Finance Minister Peer Steinbrueck have said they're unwilling to take on more debt to allow for tax cuts or increased investments to stimulate the German economy.