World Bank chief critical of Europe's response to crisis

Mon, Jun 18, 2012, 01:00

EUROPEAN LEADERS dealing with the sovereign debt crisis have done too little, too late, said outgoing World Bank chief Robert Zoellick. He warned that Europe risks losing influence and developing nations now face increasing market uncertainty.

“European politicians always act a day late and promise one euro too little. Then, when it gets tight, they add new liquidity,” Mr Zoellick told Germany’s Der Spiegel magazine in an interview published yesterday.

While that bought time it did little to address the euro zone’s structural problems, said Mr Zoellick. “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,” he said.

The World Bank chief added that Germany should take a lead 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.

In a separate interview with Britain’s Observer newspaper, Mr Zoellick warned of the risk of a “Lehmans moment” if the crisis was not handled properly. He steps down as World Bank chief on July 1st, and will be succeeded by Korean-born US health expert Jim Yong Kim, who was nominated by US president Barack Obama.

Mr Zoellick told the Observer that developing nations needed to brace for “uncertainty coming out of the euro zone and the wider financial markets”.

He was quoted as saying that “uncertainty in markets is now starting to increase costs for developing countries. The ripple effects are making everybody’s life harder.” – (Reuters)