Germany Does About-Face, Embraces Keynes

Barely a month after German Finance Minister Peer Steinbrück blasted fiscal stimulus programs like Britain's cut in the value-added tax as "crass Keynesianism," he and Chancellor Angela Merkel cobbled together a €50 billion emergency spending package of their own last week. Why the sudden about-face? Besides rising clamor for Europe's largest economy to do more to stave off the drop in consumer spending and industrial investment, the crisis hit Germany full force in recent weeks. It turns out its trade-heavy economy (47 percent of GDP is exported) is particularly vulnerable in the crisis; orders for factory machinery, a mainstay of German industry, collapsed by 30 percent in November. But will Merkel's plan work? German GDP is expected to shrink by as much as 2.5 percent this year, suggesting the spending spree will be too little, too late.