What about the lesson from the US to Europe? It is that bank bail-outs require a swift political response. When you look at the eurozone, it is not clear at all where this response could come from.
By the time European ministers have travelled for a meeting in Brussels, let alone reached or implemented a decision, the financial markets would have long melted.
Peer Steinbrück, the German finance minister, who last week told the Bundestag that the US would soon be finished as an economic superpower, should show more humility. He was lucky that last week’s crisis did not happen in Berlin or Paris or Rome. He and his colleagues would have been totally unprepared. ...
While the Americans need a better rescue plan, the Europeans need a lot more: a system that could produce a rescue plan in the first place.
And, in the same paper, Larry Summers writes,
[The] worst possible actions in the current context would be steps that have relatively modest budget impacts in the short run but that cut taxes or increase spending by growing amounts over time. Examples would include new entitlement programmes or exploding tax measures. The best measures would be those that represent short-run investments that will pay back to the government over time or those that are packaged with longer-term actions to improve the budget. Examples would include investments in healthcare restructuring or steps to enable states and localities to accelerate, or at least not slow down, their investments.
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