Lawrence Summers on European fiscal policy Lawrence Summers sees a parallel between European fiscal policy and 1970s U.S. policy in Vietnam. Back then, policymakers participated in a "stalemate machine" where they "were tragically caught in a kind of no-man's-land -- unable to reverse a course to which they had committed so much, but also unable to generate the political will to take forward steps that gave any realistic prospect of success." At every point in the European debt crisis, policymakers have done enough to stave off collapse without taking steps to ensure permanent solutions. "Perhaps inevitably, the gaps between emergency summits grow shorter and shorter," Summers says. This has hurt policymakers' credibility. Because they wrongfully believed Greece would be able to pay back 100 percent of its debt, they have less ability to convince us Spain and Italy rest on solid ground, even if they are right. Luckily, through all this, the new IMF director Christine Lagarde has stood by three principles. First, "multiple sovereigns with independent budgeting and banking regulation will over time place unsustainable strains on a common currency," Summers says. "There must now be simultaneously an increase in the central financial commitment to the financial stability of member states, and a reduction in their financial autonomy, if the common currency is to survive." Second, she has recognized that there is insufficient capital in the European banks. Third, Lagarde supports -- as her predecessors at the IMF have not -- an expansionary monetary policy. "Europe can handle its debts and contribute to a stronger global economy only if it grows. This will require both aggregate fiscal and monetary expansion." Finance ministers and governors of central banks will meet in Washington next week, Summers says, and they must take up some of Lagarde's prescriptions and find "a clearer way forward for Europe" or they will have failed.
Jeffrey Goldberg on Palestine "The Palestinian national liberation movement has arguably been the least successful such movement of the past 100 years," writes The Atlantic's Jeffrey Goldberg in Bloomberg View. "Even so, independence was within reach of the Palestinians at many different points in their history." Time and again they have rejected offers that would put them on the path to Palestinian statehood, Goldberg says. Now, Palestinian Authority President Mahmoud Abbas will seek statehood at the U.N., but this move "will only defer" the chances of an independent Palestine, Goldberg writes. Abbas will ask for a state on the West Bank and in Gaza, with a capital in East Jerusalem. But neither Israel nor the United States supports that solution. "Most Israelis view it as an attempt to limit their options in future negotiations, or to deny to them the holiest sites of the Jewish people and delegitimize the idea of a Jewish state." The U.S. opposes this proposal not because it rejects the idea of an independent Palestine, but because it sees it as a shortcut to the only true solution through negotiation. "The particular tragedy" here, Goldberg says, is that there exists "a pragmatic alternative to the fantasy-based approach to independence." Palestinian prime minister Salam Fayyad has restored security in the West Bank, prevented terrorist attacks on Israelis, created a transparent government, and helped create "a viable economy." "Fayyad has the potential to be the David Ben Gurion of the Palestinians -- a pragmatist, like Israel's founding prime minister, who builds the structures of a state in advance of statehood, as a means of showing the world that Palestine will be a viable and constructive addition to the community of nations." Netanyahu and his "increasingly right wing coalition" also stand in Fayyad's way, but Abbas is the real obstructor here, Goldberg writes, and his purposes might be more symbolic than anything. "If Abbas's goal at the UN is the enfranchisement of his people, then he will not succeed. If his goal to demonize and delegitimize his enemy, then he very well might."