At every stage of this process, from the first signs of trouble in Greece, to the spread of problems to Portugal and Ireland, to the recognition of Greece's inability to pay its debts in full, to the rise of debt spreads in Spain and Italy, the authorities have played out the stalemate machine. They have done just enough beyond euro-orthodoxy to avoid an imminent collapse, but never enough to establish a sound foundation for a resumption of confidence. Perhaps inevitably, the gaps between emergency summits grow shorter and shorter.
Read the whole thing. My favorite line is his quote of Rudi Dornbusch:
"In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could."
That line could serve as a response to those who say that the United States can afford fiscal expansion because interest rates are currently low.
Although I agree with Summers that the minimalist approach to the crisis is not working, I do not agree with his end goal of a more centralized, technocratic European fiscal and monetary system.
In my opinion, the main lesson from current events ought to be that government's ability to provide social insurance is over-used, if not over-rated. As Tyler Cowen says, governments are writing too many put options. Particularly on financial institutions.