| NEW YORK
NEW YORK Oct 25 European central bankers and
policymakers will choose European unity over any alternatives,
even if it involves high levels of inflation, said Former
Treasury Secretary Lawrence Summers in New York on Thursday.
"At end of the day, central banks will do what is necessary"
to maintain the European project, even if it means years of high
inflation or taking action beyond the latest program of
bond-buying by the European Central Bank, Summers said.
"Any time there's a choice between Europe falling apart or
something else, something else will be chosen, even if it has
Summers said he was "convinced" that if forced to choose
between a 4.5 percent inflation rate in Europe, including in
Germany, and a collapse or weakening of the union, "the choice
would be made for a period of that inflation."
In early September, ECB Chairman Mario Draghi unveiled a new
bond-buying plan aimed at easing the region's debt crisis. The
Outright Monetary Transactions (OMT) has not yet been
implemented, but global financial markets reacted favorably to
Draghi's commitment to support troubled euro zone nations like
Spain and Greece.
Summers, who was Treasury Secretary under President Bill
Clinton from 1999 to 2001 and who served as director of the
United States National Economic Council under President Barack
Obama until November 2010, said ECB action had been "reassuring
more than problem solving" but that "one has to be more
optimistic about the future of the European institutions today
than one would have been 6 months ago."
Summers was appearing on a panel on Europe's debt crisis at
the Economist Buttonwood Conference in lower Manhattan.
He was joined for the discussion by BlackRock vice chairman
and former head of the Swiss National Bank, Phillip Hildebrand,
and economist, Lorenzo Bini Smaghi, a former member of
the Executive Board of the European Central Bank.
All three men agreed that the future of the euro zone
includes Greece, and that ECB actions over the last few months
had fundamentally changed the course of the crisis for the
"It has been a game changer," said Hildebrand, who cautioned
that further strong action was needed, especially in Spain.
"Speech is not enough. The sooner more decisive action is
taken, the higher the probability it will yield a successful