Schaeuble defends low deficit

German finance minister Wolfgang Schaeuble says he is tired of calls to sacrifice deficit reduction for economic growth, just as US Treasury secretary Jacob J Lew pressed Germany to boost domestic demand.

Speaking at a banking conference in Berlin a day before leaving for meetings of the IMF and the World Bank in Washington, Schaeuble said growth is the strongest in countries where deficits are the lowest.

“I can’t stand these debates any longer that one has to choose between austerity policies and growth policies,” he said. “We always get these recommendations from economists — like the most recent analysis from the IMF that we have more leeway to spend.”

Schaeuble’s comments are a rebuff to criticism that Germany should do more to support recovery in the 18-nation euro region. Chancellor Angela Merkel’s government has also been criticised for relying too much on exports and doing too little to spur domestic-led growth.

Lew said in a CNBC interview that Europe needs to be alert to risks of low demand and deflation and called on “surplus nations” such as Germany to boost demand.

Merkel said earlier yesterday that German domestic spending “will contribute more to growth this year than in previous years.” In a speech to lower-house lawmakers in Berlin, she cited the “fragile situation” in emerging economies as a threat to global growth.