Europe Crisis: A Case of Too Little, Too Late
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Outgoing World Bank Chief Robert Zoellick has said that European leaders have acted too late and done too little to contain its sovereign debt crisis, and now risks losing its global influence.
In an interview with German magazine Der Spiegel, Zoellick added that Europe’s inaction only managed to buy time, but with little done to address the region’s underlying structural problems.
Calling on European leaders to act quickly, he said short-term measures will no longer suffice and European leaders must now make deeper fiscal and structural reforms.
Outgoing World Bank Chief Robert Zoellick has said that European leaders have acted too late and done too little to contain its sovereign debt crisis, and now risks losing its global influence.
In an interview with German magazine Der Spiegel, Zoellick added that Europe’s inaction only managed to buy time, but with little done to address the region’s underlying structural problems.
Calling on European leaders to act quickly, he said short-term measures will no longer suffice and European leaders must now make deeper fiscal and structural reforms.
Cautioning that Europe should not allow itself to be held hostage by Greece, Zoellick said:
[quote] 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. [/quote]
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In a separate interview with The Observer, Zoellick warned that Europe runs the risk of starting a “Lehman-style” global crisis that will have dire consequences for developing nations.
In 2008, Lehman Brothers was brought to its knees in a bankruptcy that proved to be the trigger for the deepest slump in the global economy since 1930, and Zoellick said developing countries needed to “prepare for the uncertainty coming out of the eurozone and the wider financial markets.”
While its sister organisation, the IMF, has been more engaged in the eurozone rescue operations, the World Bank has been working to ensure that emerging economies are prepared for a second economic crunch.
He told the Observer:
[quote] Given the volatility in the world economy, there is a big emphasis on helping developing countries to develop social safety nets that don’t bust the budget. [/quote]
Zoellick said he was concerned that the prolonged crisis was starting to lead to pressures for protectionism and economic nationalism.
“This is not just an economic crisis but a political threat as well,” he said. “We must make sure we keep markets open and beware against creeping protectionism. We are starting to see some increase in the use of trade restrictions.”
Zoellick retires as Chief of the World Bank at the end of the month.
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