Merkel defies calls for tax cuts

Angela Merkel says indiscriminate tax cuts should be avoided

German chancellor Angela Merkel has ruled out further tax cuts before elections in September next year saying she has doubts over their impact.

She said her government had no need to enter a "senseless" competition with other countries which were spending billions of euros to prevent recession.

The chancellor has been facing criticism for her economic strategy.

But she said German consumers would put money from tax cuts into savings instead of spending it in shops.

"I will not stand for action for action's sake", Angela Merkel told the Christian Democratic Party's convention.

Germany has already launched a 480bn euro ($606bn; £404bn) rescue package for German banks hit by the credit crunch, and a tax holiday on the sale of new cars.

But rival politicians and industry leaders argued that Germany should introduce a stimulus plan which included significant tax cuts, similar to those offered in the United States, Britain and France.

Figures released in November confirmed that Germany is officially in recession after its economy contracted for two consecutive quarters.