The comment from Czech Prime Minister Mirek Topolanek, who is hosting a two-day EU summit, came in the wake of the announcement Wednesday that the US Federal Reserve will launch a bold US$1.2 trillion (S$1.81 trillion) effort to lower rates on mortgages and other consumer debt.

While that is aimed at increasing the amount of money in the economy, not the amount of government spending, it underlines the contrast between the European stance and a more aggressive US approach.

European governments resisted a push for more spending from the US at a summit of Group of 20 finance ministers last week, and Thursday's remarks underlined their position ahead of an April 2 summit of G-20 national leaders in London.

The EU has already agreed on euro200 billion (S$408 billion) government spending package over two years, but labor and socialist leaders and even Nobel laureate Paul Krugman claim a lot more is needed to weather the storm.

German Chancellor Angela Merkel also remained at the forefront opposing any more deficit spending. 'We have already made our contribution,' she said.

Ms Merkel and French President Nicolas Sarkozy warned in a joint letter of the dangers of spending too much, saying excessive public debt threatens global stability and countries must move swiftly to pay off debt when they can.

Germany is worried about being viewed as Europe's paymaster in an election year when politicians are trying to prove themselves prudent masters of the EU's largest economy.

EU officials say the priority should be implementing the plans that have already been agreed and setting out reforms to financial markets that could restore confidence and get banks lending again.

Instead, Martin Schulz, leader of the socialists in the European Parliament wants to raise subsidies across the EU to 4 per cent of economic output. While some nations have met that target, most are still well below the mark. -- AP