Germany has lambasted Gordon Brown’s response to the economic crisis as “crass” and “depressing” in an astonishing attack as EU leaders prepare to debate how to recover from the recession in Brussels today.

Peer Steinbruck, the social democrat German finance minister, warned that it would take Britain a generation to pay for the huge financial stimulus introduced by the government in its attempt to kick-start the economy.

Mr Steinbruck's comments emerged as Mr Brown prepared to join European Union leaders at two-day summit where they are to debate a €200 billion EU-wide stimulus package aimed at fighting an economic downturn.

Mr Steinbruck, who has resisted pressure from Brussels, London and Paris to commit Europe’s biggest economy to a similarly large increase in borrowing, ridiculed Mr Brown’s gamble of cutting VAT to stimulate spending.

His outspoken attack, in an interview with Newsweek, was immediately rejected by Downing Street.

But it will find an echo on Conservative benches in Britain and raise fears that the Government’s response to the crisis has been reckless and wrong-headed just when the British economy – and sterling - is in desperate need of a confidence boost.

Sterling today continued to fall against the euro amid continuing concerns about the strength of the British economy.

This morning, €1 cost 87.9p, an increase from yesterday’s close of 87.74p and 34.4 per cent off sterling's peak against the single currency in 2000 when one euro was worth 57p.

Asked why he objected to the European Commission’s call, backed by Britain, for 1.2 per cent of GDP to be committed to a financial stimulus, the German finance minister said: “The speed at which proposals are put together under pressure that do not even pass an economic test is breathtaking and depressing.

“Our British friends are now cutting their value-added tax. We have no idea how much of that stores will pass on to customers. Are you really going to buy a DVD player because it now costs £39.10 instead of £39.90?

“All this will do is raise Britain's debt to a level that will take a whole generation to work off. The same people who would never touch deficit spending are now tossing around billions.

“The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking. When I ask about the origins of the crisis, economists I respect tell me it is the credit-financed growth of recent years and decades. Isn't this the same mistake everyone is suddenly making again, under all the public pressure?”

Mr Brown has repeatedly accused the British Conservatives of wanting to do little or nothing to beat the recession because they have been sceptical about the amount of borrowing he had proposed to fund the VAT cut.

But Mr Steinbruck set the scene for a bruising argument as Mr Brown was due to meet Angela Merkel, the German Chancellor, at the EU summit today.

Mr Steinbruck added: “We have a bidding war where everyone in politics believes they have to top up every spending program that has been put to discussion. I say we should be honest to our citizens. Policies can take some of the sharpness out of it, but no matter how much any government does, the recession we are in now is unavoidable.

"When I look at the chaotic and volatile debate right now, both in Germany and around the world, my impression and concern is that the daily barrage of proposals and political statements is making markets and consumers even more nervous.”

He rejected the call from Brussels for Germany to increase its cash injection into the economy, preferring to pump money into bank rescue rather than public spending.

“Brussels is pressing for a joint European approach. For a while the position in Brussels and a few other places has been "We're now very much for setting up large-scale spending programs, but we're not really going to ask what the exact effects of those might be. And since the amounts are so high, well, let's get the Germans to pay because they can." Ms. Merkel and I are trying to calm them down a bit just now, and understandably that's getting us criticised.”

Mr Steinbruck appealed for calm, warnging that there was no silver bullet for the downturn: "It is the yearning for the Great Rescue Plan. It doesn't exist. It doesn't exist! Dealing with an unprecedented crisis is a puzzle, a trial-and-error. Honestly, I don't know.

"I tend to be skeptical because it is human nature to see the crisis as even worse than it is. I don't want to downplay anything; 2009 looks like it will be a very difficult year. But we are not about to collapse."

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