Germany Says No To Geithner: German Announces Package To Cut 80B Euros In Spending

In a huge setback to what Timothy Geithner wanted, Germany will not be spening new money in stimulus to save the global economy. On the contrary, Germany announced today a fiscal austerity package that cuts 80 billion euros in spending by 2014. The savings will be achieved through cuts in public spending (including removal of 15,000 government jobs) and taxation of some specific segments of the economy.

According to the German site Spiegel International, this is the largest program of fiscal austerity since World War II. "Germany, Europe's biggest economy, has an obligation to set a good example," Angela Merkel said.

According to the Financial Times, the country will make structural savings (already adjusted for cyclical effects) of 11.1 billion euros in 2011, 16.1 billion in 2012, 25.7 billion in 2013 and 32.4 billion in 2014. Merkel rejected proposals to increase income tax and chose to focus on spending cuts.

The government will also create an "eco-tax" (on air travel), with which it aims to raise 1 billion euros per year, and on financial transactions, which should add 2 billion per year.