Morning Must-Read: How to Assess the Policies of Britain’s Conservative-Social Democratic Coalition: Larry Summers vs. George Osborne in Davos

Larry Elliott: Davos 2014: Larry Summers attacks George Osborne’s austerity programme: “Summers… said the chancellor was wrong to blame the eurozone crisis for the weakness of business investment and governments should be spending more on infrastructure….

“I see less need to impose cuts on people who are vulnerable in the US context than the chancellor sees in the European context,” Summers said…. “It’s several years since the US exceeded its peak GDP before the crisis – that still hasn’t happened in the UK.”… The chancellor responded to Summers’s charge that Britain, unlike the US, had failed to raise national output above its pre-recession levels by saying that the UK had suffered a deeper slump and was more dependent on the financial sector….

Summers, once a frontrunner to succeed Ben Bernanke at the Federal Reserve, responded to Osborne’s claim that the Bank of England had tools to rein in the property market by rubbishing the initiative: “I worry about macro-prudential complacency,” Summers said, a reference to the notion that central banks can head off problems before they arise by action to restrain the animal spirits of lenders…. Summers rejected Osborne’s argument that high borrowing costs in troubled eurozone countries were the result of governments overspending and losing the trust of financial markets…. High borrowing costs were due to the specific nature of the eurozone currency–the fixed exchange rate and the inability of individual countries to tailor their economic policies to their own needs.