Per Steinbruck, Germany’s finance minister, told the Bundestag, Germany’s Parliament, recently that his country had no intention of following Britain’s lead in cutting VAT and warned against a “bidding war” of stimulus plans.

Steinbruck acknowledged that Germany is now in recession and may contract by -1% next year, but slammed media hysteria and the fashion for “wallowing in gloom”. There are growing concerns that Berlin and a group of allied states will refuse to endorse the European Commission’s call for a €130bn (£111bn) fiscal plan, or they may insist that it is watered down. However, Germany has a budget near balance and has the most scope for a spending boost.

Steinbruck said ‘Keynesian’ prime-pumping in the 1970s achieved little and saddled the nation with debt. “The Government cannot subsidise the economic crisis away,” he said.

Separately, the European Central Bank (ECB) has begun to play down hopes that it would follow Britain and Switzerland with drastic rate cuts. It dismissed fears of deflation as overblown and warned that easy money policies merely lead to a “time of reckoning” later.