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On the current state of the global economy, head of the World Bank Robert Zoellick has put in his two cents. Zoellick says loss of market confidence in economic leadership in key countries like the United States and Europe, coupled with a fragile economic recovery, have pushed markets into a new danger zone. He's also urging more free and open markets to prevent protectionism.
"From drama to trauma", said the world bank head.
Speaking at the Asia Society dinner in Sydney, Robert Zoellick warned that deepening economic woes in the U.S. and Europe are pushing the world into a new danger zone. He said policy makers should take the situation seriously.
Robert Zoellick said, "What has happened in the past couple of weeks is there is a convergence of some events in Europe and the United States that have led many market participants to lose confidence in the economic leadership of some of the key countries. What we've seen is that confidence is a fragile sort of element of how any market economy works. And I think that those events combined with some of the other fragilities in the nature of recovery have pushed us into a new danger zone. And I don't say those words lightly."
|World Bank Chief Robert Zoellick speaks at the Asia Society's annual dinner in|
Sydney August 14, 2011. The world is going through a multi-speed recovery,
about half of global growth comes from emerging markets which face different
challenges, such as economy overheating and inflationary pressures, Zoellick
said on Sunday. REUTERS/Tim Wimborne
Zoellick said the process of dealing with the sovereign debt problem and some of the competitive issues in the euro zone tended to be done "a day late," leaving markets worried that authorities may not be ahead of the problem or moving in the right direction.
Robert Zoellick said, "The process with dealing with the sovereign debt, but more than the sovereign debt some of the competitive issues have been done a day late and a euro short I guess I'd say. And so it's natural if countries have to come together in that process but, that it might not be what you really need when you run into a major financial or fiscal problem, which is to get ahead of it, to sort of jump ahead and create a sense of markets that the economic leadership is not only on top of the problem but moving in the right direction."
Zoellick said efforts to cut U.S. government spending have so far been focused on discretionary spending, as opposed to the entitlement programmes such as social security.
Zoellick also emphasized the importance of more free and open markets to prevent the resurgence of protectionism.
He also said the global economy was going through a multi-speed recovery, with emerging economies such as China, India, Brazil and ASEAN countries now the source of growth and opportunity.