Dec. 1 (Bloomberg) -- The European Central Bank may need to step up its response to the sovereign debt crisis, former U.S. Treasury Secretary Lawrence Summers said.
“Without a recognition that some of the functions traditionally performed by lenders of last resort need to be associated with the European monetary system, there will be continuing vulnerability to crises,” Summers told a conference in Madrid today via video link.
The ECB, backed by Germany, is resisting pressure to increase bond purchases to shield Spain, Italy and France from the spreading debt crisis. ECB President Mario Draghi told the European Parliament in Brussels today that the bank’s bond- buying program, which has included Spain and Italy since August, is “limited” and that euro-region governments unifying their fiscal policies would be a more effective way to end the crisis.
The ECB’s governing council, which cut its benchmark interest rate to 1.25 percent last month, meets again on Dec. 8, a day before European Union leaders gather for a summit on the crisis.
“Without monetary policies that promote growth, the prospects for servicing debt will be that much more difficult,” said Summers, who was treasury secretary under President Bill Clinton and director of the National Economic Council under President Barack Obama until last year.
--Editors: Andrew Atkinson, Leon Mangasarian
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