Zoellick criticizes Europe for debt crisis

AP News
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Posted: Sep 14, 2011 12:33 PM
Zoellick criticizes Europe for debt crisis

The head of the World Bank is criticizing the 17 countries that share the euro currency for not taking tough actions to prevent the debt crisis in Europe.

Robert Zoellick said Wednesday that the nations did not act responsibly because they created a shared currency without ensuring that it would work. He said they should have first considered those nations that couldn't compete in global trading markets and those that are burdened by debt.

"The global economy has entered a new danger zone with little running room as European countries resist difficult truths about the common responsibilities of a common currency," Zoellick said.

Fears that Greece is headed for a default on its debt have roiled markets for days.

A Greek bankruptcy could destabilize other financially troubled European countries, such as Portugal, Ireland, Spain and Italy.

It would also be a severe blow to many European banks, which are large holders of Greek government bonds. Moody's on Wednesday downgraded the credit ratings of two French banks, Societe Generale and Credit Agricole.

Treasury Secretary Timothy Geithner said Wednesday that European leaders know that they have been "behind the curve" in dealing with the debt crisis. But Geithner said in an appearance on CNBC that European governments now understand the severity of the situation and have the financial resources "to do what it takes to hold this thing together."

In his speech, Zoellick also criticized the United States for failing to deal with soaring budget deficits and not moving forward with free trade agreements.

"It is not responsible for the United States to falter in facing fundamental issues such as unsustainable growth in entitlement spending, the need for a pro-growth tax system and a stalled trade policy," Zoellick said in a speech at George Washington University.

Japan also shared blame for the latest risks to the global economy, Zoellick said. Japan had resisted making the structural reforms to its economy that would allow the world's third largest economy to achieve stronger growth.

Zoellick said that the United States, Europe and Japan had "procrastinated for too long on taking the difficult decisions" to fix problems in their economies.

"Unless Europe, Japan and the United States can ... face up to responsibilities, they will drag down not only themselves but the global economy," Zoellick said.

He made his comments in advance of the annual meetings next week in Washington of the 187-nation World Bank and its sister lending institution, the International Monetary Fund.