Merkel sets her stall ahead of the G20

There is an interview in this morning's FT with the German chancellor ahead of the G20 in which she rejects the advice that Germany like China should try to boost its internal demand to correct the world's economy.

Merkel believes that her country

is an over-indebted, export-oriented economy with an ageing, shrinking population. It cannot boost consumption at the expense of exports. “The German economy is very reliant on exports, and this is not something you can change in two years,” she said. “It is not something we even want to change.” Instead, it will try to sit through the turbulence while taking care not to lose too much industrial muscle so that it can ride the upturn when it comes.

However she is firmly of the opinion where the root for our troubles lies

misguided efforts in the US, both by the government and the Federal Reserve, to re-start artificially the economy after September 11 by pumping ever-cheaper money into the financial system.

and is certain that the way out is not to spend more

“The crisis did not take place because we were spending too little but because we were spending too much to create growth that was not sustainable.