During a panel session in which Summers discussed the end of QE in the US alongside IMF chief Christine Lagarde, questions about Europe were raised ahead of the impending start of the European Central Bank’s bond-buying programme.
Lagarde argued the effects of QE were already being felt in anticipation. Summers said this was "the worry".
“I agree with Christine that QE has already had significant impact, and that’s why I’m worried. We’ve already had a set of positive developments, and the economic forecasts are pretty dismal from here,” said Summers.
“I am all for European QE, but the risks of doing too little far exceed the risks of doing too much. Deflation and secular stagnation are the macro-economic threat of our time. That said, I think it is a mistake to suppose QE is a panacea or that it will be sufficient,” the Harvard economist added. “We’re all for QE in Europe. We can’t afford not to have it. It’s necessary, but it’s not sufficient.”
Lagarde also said more progress needs to be made on uniting Europe fiscally. “There is huge potential... but to think of it as one single economic unit, unfortunately it is not yet the case.“