"What's happening in Europe is not working. What followed in Japan was 15 years of deflation and dismal economic performance, followed by dramatic declines in interest rates – that is the path that Europe is on without a substantial discontinuity in policy," Summers said at the debate.
Summers said Europe, and Germany in particular, should follow recent advice from the IMF to invest in infrastructure projects, which would "pay for itself " by lowering sovereign debt burdens.
However, Germany's Schäuble refuted comparisons with Japan, saying Europe was a "specific" case. "You can't compare (Europe) with Japan, nor with the U.S., to be very frank," he said in response to Summers.
"You have to know the specificities of Europe— on average (Europeans') expenditure for social purposes in relation to GDP is double compared to the U.S., Canada and Australia," he added.
Prospects 'not so great'
Last month, the IMF said Germany and other euro zone countries could benefit from ramping up infrastructure spending, adding that this type of public investment was most effective in countries with low-growth economies that were running below their potential.
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According to IMF research, raising public investment by 1 percentage point of gross domestic product (GDP) in an advanced economy would increase output by about 0.4 percent that year, and by 1.5 percent after four years.