There's a lot of work that's left undone when it comes to fixing the U.S. and European economies, and it's not going to be easy, says Harvard University professor and former Treasury Secretary Larry Summers.
The European Central Bank has pumped liquidity into is banking system via a low-cost loan program made available to banks, known as a long term refinancing operation (LTRO), which Summers describes as "a very important step" to easing tight credit conditions in Europe.
"That’s lubricating credit and economic activity. The sense that we are near the edge of a precipice has been clawed back," Summers tells CNBC.
Such a program, however, is not enough without structural economic reforms.
"The question is whether this is grounds for complacency or will the time provided by the LTRO be used to make the fundamental adjustments necessary."
"The better approach to financial stability goes through raising capital requirements, reducing leverage, ensuring liquidity, pushing for recognition of the problems, making sure that regulated sector doesn’t face untenable competition from an unregulated banking sector."
European policymakers have taken steps to firewall the crisis, but for the past few years, default fears in indebted countries like Greece or Italy refuse to subside.
U.S. Treasury Secretary Timothy Geithner has said Europe needs to do more to contain its debt crisis and prevent it from infecting the rest of the world, pointing out that the "unfinished piece" of resolving the is "building a stronger, more credible firewall," according to MarketWatch.
While assistance from multilateral lending institutions such as the International Monetary Fund can help, they can only act in a supporting role but not act "as a substitute," Geithner says.
The U.S. is the largest shareholder in the International Monetary Fund.
Currently, Greece is negotiating restructuring terms with its private creditors to avoid a larger and messier default, as striking a deal is required if the country is to tap fresh bailout money.
Talks have dragged on for weeks, and patience is reportedly wearing thin.
"We've had enough announcements, the government in Athens must act now," German Finance Minister Wolfgang Schaeuble was quoted in an interview due to appear in Friday's edition of the Stuttgarter Zeitung, the AFP newswire reports.
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