Larry Summers on the Eurozone: current approach likened to mistakes of the Versailles Treaty
18 July, 2011
Todays Financial Times has an interesting comment piece from Bill Clinton’s former Treasury Secretary, Lawrence Summers. Here is a small extract.
….no country can be expected to generate huge primary surpluses for long periods for the benefit of foreign creditors. Meeting debt burdens at rates currently charged by the official sector for credit – let alone the private sector – would involve burdens on Greece, Ireland and Portugal comparable to the reparations’ burdens Keynes warned about in The Economic Consequences of the Peace …. The twin realities that Greece, Italy and Ireland need debt relief and that the creditors have only limited capacity to take immediate losses, mean that all approaches require increased efforts from the European centre.
Given the comparison used by Summers, it’s ironic that it is the Germans that are in the vanguard of attempts to avoid sensible burden-sharing among the wealthier Eurozone nations. Current ECB policy is trying to impose a “Carthaginian Peace” on the Eurozone, which will have severe consequences for all, not just the bailed-out countries.
As an aside, I wonder does German Chancellor Angela Merkel (a highly-qualified physicist) agree with Summers’ controversial remarks in a 2005 speech where he suggested that the under-representation of women in science and engineering could be due to a “different availability of aptitude at the high end,” and less to patterns of discrimination and socialization? His remarks are believed to have contributed to his resigning his position as president of Harvard University the following year.