Sept. 14 (Bloomberg) -- European policy makers are not living up to their commitment to the euro as the region’s debt crisis threatens to spread, World Bank President Robert Zoellick said.
“It is not responsible for the Eurozone to pledge fealty to a monetary union without facing up to either a fiscal union that would make monetary union workable or accepting the consequences for uncompetitive, debt-burdened members,” Zoellick said in prepared remarks for a speech at George Washington University today. “We must all be responsible stakeholders now,” he said.
After almost two years combating the sovereign debt crisis focused on Greece, Ireland and Portugal, European policy makers have yet to reassure investors demanding higher yields from nations such as Spain and Italy.
Finance ministers from Brazil, Russia, India, China and South Africa plan to meet in Washington on Sept. 22 to discuss ways to help Europe, and Treasury Secretary Timothy F. Geithner is expected to urge his European counterparts to step up their crisis-fighting efforts when he meets with them this week.
Zoellick also took a swipe at the U.S. for insufficiently addressing “fundamental issues such as unsustainable growth in entitlement spending, the need for a pro-growth tax system and a stalled trade policy.”
Congress has yet to agree on a 10-year plan to cut at least $1.5 trillion in spending following a last-minute agreement to raise the U.S. federal debt ceiling last month.
Drag Down Economy
The attitudes of officials in Europe, the U.S. and Japan, which is resisting changes to its economic model, may drag down the global economy, said Zoellick, a former U.S. trade representative under President George W. Bush. The officials “have procrastinated for too long on taking the difficult decisions,” he said.
Developed economies are not bound for an “inevitable decline” while Brazil, China, India, Russia, South Korea and Indonesia alone are forecast to account for more than half of the world’s economic growth by 2025, Zoellick said.
“With credible and definitely possible action -- not just short-term fixes -- on debt and deficits to restore confidence, and with a focus on structural and tax reforms to spur private sector growth, boost productivity, and create jobs, advanced economies can turn around and power ahead,” he said.
China, which today already consumes half of the world’s cement and a third of the world’s eggs, also needs to be a “responsible stakeholder” in an interdependent global economy, Zoellick said.
“We need China to be a responsible trading partner,” he said. The world’s second-largest economy should also “move toward a responsible exchange rate system,” and “offer intellectual property responsible protection” while making “responsible investments” he said.
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