Brown to meet Merkel on economy after tiff

By Adrian Croft

LONDON (Reuters) - Prime Minister Gordon Brown will hold talks on the economy with German Chancellor Angela Merkel in Berlin next Wednesday, after signs of tension emerged between the two EU states in recent weeks.

Brown will also meet U.S. Federal Reserve chief Ben Bernanke in London next Tuesday, his office said.

The financial situation will be on the agenda for both meetings, a spokesman for Brown said.

Last month Germany and Britain, two of Europe's biggest economies, became embroiled in a diplomatic row after Germany's finance minister criticised Brown's plans to borrow billions of pounds to try to stop a recession turning into a slump.

With Britain chairing the G20 group of big industrialised and emerging economies this year, Brown and Chancellor Alistair Darling will step up discussions with other countries in the coming weeks "on the next steps forward" in tackling the financial crisis, Brown's office said.

Brown will host a G20 summit in April to assess pledges to assist the world economy made at a Washington summit last November.

The state of the economy was the main item on the agenda during a two-hour meeting of Brown's cabinet in Liverpool on Thursday. "The prime minister referred to the increasingly challenging global economic environment," a statement from Brown's office said.

The Bank of England cut interest rates by half a percentage point on Thursday to a record low of 1.5 percent as policymakers -- caught out by the severity of the downturn -- pull out all the stops to soften the economic slide.