Germany backs EU stimulus goal despite row

By Ingrid Melander and David Brunnstrom

BRUSSELS (Reuters) - Germany said on Thursday it was fully behind an EU-wide stimulus package aimed at pulling the bloc out of recession but insisted it would not follow others in "tossing around billions" to ease the crisis.

An EU summit in Brussels, while dealing with deepening economic problems, also aims to put the EU in the lead of the global fight against climate change. French President Nicolas Sarkozy urged leaders to set aside differences and agree on a package of moves to cut the bloc's emissions by a fifth by 2020 from 1990 levels.

The 27-nation bloc wants to agree on a 200-billion euro (177.5-billion pound) stimulus package to avert a deepening recession, but Germany -- the largest economy in Europe -- has doggedly resisted calls on it to contribute much more than planned.

"We support the view of the (European) Commission that we need to provide 1.5 percent of GDP for the stimulus package to strengthen the economy," Merkel told reporters as she arrived for the two days of talks.

"Germany is aware of its responsibility as Europe's biggest economy and Germany will also look at what we may have to do," she said, repeating earlier suggestions it might top up a first national package worth 32 billion euros.

But Berlin remains at odds with others such as Britain on how to rescue a European economy heading sharply into recession after the worst credit crunch in 80 years, insisting it will not follow them with hefty cuts to value added tax (VAT) that would damage its budget.

In an interview with Newsweek magazine, German Finance Minister Peer Steinbrueck singled out Prime Minister Gordon Brown for abandoning fiscal prudence and switching to policies that he said would saddle a generation with debt.

"The speed at which proposals are put together under pressure that don't even pass an economic test is breathtaking and depressing," Steinbrueck said in the interview, published on the magazine's website on Wednesday.