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Europe doing too little: World Bank chief

Berlin, June 17, 2012

European leaders dealing with the sovereign debt crisis have done too little, too late, outgoing World Bank chief Robert Zoellick said, warning that Europe risks losing influence.

In interviews with European publications this weekend, he also said developing nations now face increasing market uncertainty.

Zoellick urged Europe to act quickly. He spoke on the eve of an election in Greece on Sunday that has financial markets on a knife-edge.

"European politicians always act a day late and promise one euro too little. Then, when it gets tight, they add new liquidity," Zoellick told Germany's Der Spiegel magazine in an interview published on Sunday.

While that bought time, it did little to address the euro zone's structural problems, Zoellick said.
 "It's no longer so much about which model the Europeans choose. They should just decide on one. Quickly."

"If Europe continues to falter, it will lose global influence. European leaders must be aware of that," Zoellick said, adding that Germany should take a leadership role and keep pushing for fiscal and structural reforms.

He said that while a Greek exit from the euro would have enormous consequences, Europe should not allow itself to be held hostage by Athens.

"That feeling of uncertainty should not lead to Europe giving Greece everything that the government there wants. If the Greek leadership threatens to leave the euro zone, then the rest of Europe must have developed a mechanism to cushion that," he said.

In a separate interview with Britain's Observer newspaper, Zoellick warned of the risk of a "Lehmans moment" if the crisis is not properly handled - a reference to the bankruptcy of U.S. bank Lehman Brothers in September 2008 that triggered a global financial slump.

Zoellick steps down as World Bank president on July 1 and will be succeeded by Korean-born US health expert Jim Yong Kim, who was nominated by President Barack Obama for the post.

He told the Observer that developing nations needed to brace for "uncertainty coming out of the euro zone and the wider financial markets".

"Uncertainty in markets is now starting to increase costs for developing countries," Zoellick was quoted as saying. "The ripple effects are making everybody's life harder."

The euro zone will be on the agenda at a G20 summit from Monday in Mexico, overshadowed by mounting fears about Spain and Italy. - Reuters




Tags: World Bank | Europe | Zoellick |

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