Larry Summers, a former top economic adviser to President Barack Obama, says the International Monetary Fund and European authorities aren’t doing enough to stem Europe’s debt crisis.
The Harvard professor’s comments came in response to remarks made by IMF Deputy Managing Director Zhu Min in a Wall Street Journal panel discussion.
“The whole framework is there” to solve the crisis, Min says. “I think it's moving in the right direction.”
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Summers would have none of it. “I'm discouraged by what my friend Zhu Min just said,” he states.
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Lawrence Summers
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“The beginning of having a real solution to this problem is recognizing that the things that have been said before haven't really been right, and have been kinds of denial. And if the IMF is continuing to stand with the October framework, it is continuing to perpetuate the denial that has brought us to this point.”
No more austerity can be wrung from Greece and Italy, Summers says. What’s needed is huge support from the European Central Bank, IMF or a coalition of countries. “And we just haven't seen anything like that yet.”
Given the ECB’s inability to act as a lender of last resort to European governments, a proposal has arisen for the ECB to lend money to the IMF, and then the IMF would lend that money to individual countries.
But Europe may be reluctant to transfer power to the IMF, and IMF members may be reluctant to bail out Europe.