Over the past three years, I have closely followed the German finance minister with a growing sense of disbelief. Peer Steinbrück’s lack of diplomacy is remarkable only insofar as that it has now become known to a wider audience. He has been talking like this forever. His bashing of the “Anglo-Saxons” goes down very well in Germany for now. But at the time of the general elections in September 2009, Germany and the rest of the eurozone will be in the middle of an economic depression. Then people will be asking why their chancellor and their finance minister have been so extraordinarily complacent.

Given the extreme economic deterioration in the past few weeks, I actually expected they would have done something by now. But they are digging in. Angela Merkel, the chancellor, held a domestic summit in Berlin to discuss the economic situation. I suspect another stimulus package will come eventually, sometime next year. But I doubt it will come in time to help the economy in 2009. Whatever is eventually decided will have no economic effect until well after the elections. Germany is thus entering 2009 with a total stimulus of 0.5 per cent of gross domestic product, in other words, with essentially no fiscal support. Since monetary policy has little traction when credit markets are dysfunctional, there is hardly any support at all.