EMMA VANDORE and GREG KELLER
January 8, 2009
PARIS – The head of Europe’s biggest economy said Thursday that world leaders should be looking at the massive U.S. deficit and other economic imbalances, not just problems caused by financial markets, as they debate a new global order.
Speaking at a conference in Paris on the future of capitalism, German Chancellor Angela Merkel singled out the American budget deficit and China’s current account surplus — the difference between exports and imports — as problems upsetting the global economy.
“We would be making an error if we were content to look solely at financial markets,” she said.
She deplored huge debts that governments are accumulating to spend their way out of the present crisis. But she said she recognized, for the moment, that “there is no other possibility.”
A Congressional Budget Office report estimates that the U.S. federal budget deficit will hit an unparalleled $1.2 trillion for the 2009 budget year — and that is before President-elect Barack Obama’s sweeping stimulus package is calculated. European governments have agreed to be flexible about budget rules that limit deficits to 3 percent of gross domestic product as recession bites.
Merkel said the International Monetary Fund has not managed to regulate global capitalism, and she called for the creation of an economy body at the United Nations, similar to the Security Council, to judge government policy.