NOW THAT the international financial crisis has well and truly embedded itself in a real and deepening recession throughout the world's most developed countries, attention has turned to how activity can be stimulated back towards growth again.
In the United States this imperative is in the foreground of the incoming Obama administration's economic planning. In Asia, China more than Japan is taking that road. In Europe, France and the United Kingdom are giving a lead. This has cued the European Commission to propose an EU-wide fiscal stimulus package to spread its impact.
But Germany's leaders do not agree, arguing variously that this would be "ineffective populism" or tantamount to bailing out those who did not correct their state finances during more prosperous times. That makes for an unfortunate disharmony in EU affairs. Germany's attitude flows from its traditionally very conservative approach towards saving and spending, in a cultural difference from its EU partners. Nevertheless, Berlin has previously been willing to finance EU-wide programmes from which it can eventually benefit, as it did with the cohesion and structural funds that benefited Ireland, Spain, Greece and Portugal in the 1990s and the central and eastern European members more recently. On top of that Germany originally favoured aligning monetary union more closely with economic and political union than actually transpired in designing the euro regime.
The commission's stimulus plan is in fact quite flexible, in keeping with that outcome. It proposes an overall €200 billion package of investments and tax cuts, €30 billion of it funded from frontloading the EU's regional budget, with the balance consisting of co-ordinated and supplementary national plans. Compared to the EU's gross domestic product of €13,000 billion this is surely not an extravagant amount.
It is suggested that measures such as temporary reductions in VAT and targeted investments in transport, communications and environmental technology are appropriate national responses, and that some states can better afford them than others, given the differential impact of the recession. That certainly includes cash-strapped Ireland.
The commission plan will be decided at this week's European Council. It deserves sympathetic attention and consideration. A deepening recession calls out for bold and unorthodox responses. This one is probably too timid. Germany should keep its options open and not block it.