European governments need to restructure their economies to restore the confidence of financial markets as the global economy moves into a new danger zone, World Bank President Robert Zoellick said Tuesday.
Zoellick, a former U.S. trade negotiator under President George W. Bush, said the debt crisis in Europe and the political quarrel in Washington over the U.S. government debt limit had "unleashed a wave of worry and uncertainty about the global economy" that created steep falls on share markets.
"I think over the past couple of weeks we've moved into a new danger zone," Zoellick told reporters in a joint press conference with Australian Treasurer Wayne Swan.
"What will now be important to watch is whether that hit to confidence also extends to consumers and businesses and also how the governments respond," he said.
Zoellick welcomed news that the European Central Bank had bought euros 22 billion ($32 billion) of Italian and Spanish bonds last week amid concerns the two countries have unmanageably high debt.
But he said central bank's efforts were short term, and did not change the underlying problem of high debt levels.
Debt burdened European countries "have not really gotten ahead of the problem and haven't really been able to deal with some of the fundamentals and structural issues," Zoellick said.
"I'm trying in a way that I can to start to condition both the political leadership and the general public _ you've got to do more than you're doing and you have to move more actively," he said.
Zoellick thanked Swan and other finance ministers for co-writing an article published in Tuesday's Financial Times newspaper that said a crisis in confidence in policy makers posed a greater challenge than any economic barrier.