Tuesday, July 31, 2012

Ex-World Bank chief praises ECB president's willpower

SINGAPORE: The former president of The World Bank has lauded the move by the European Central Bank (ECB) to do what it can to preserve the euro.
Speaking at a lecture series in Singapore on Monday, Robert Zoellick commended ECB president Mario Draghi's willpower.

But he added that it will be up to the European bloc members to see the policy through.
Last week, ECB president Mario Draghi suggested the use of Europe's rescue fund to buy government bonds and help bring down borrowing costs in Spain and Italy.
Europe is muddling through its crisis.

And the next few years will see the bloc pre-occupied in trying to solve its ails, the former World Bank chief said.

Despite winning early support in its aim to save the euro, the ECB still has a long way to go.
Robert Zoellick said: "The ECB can't do it alone, and it's going to require the member states that will have to make reforms. Remember, monetary policy fundamentally buys time. As one of my other themes here, I guess.

"And so ultimately, it's going to depend on the countries to make the reforms and it's going to depend on some of the northern-tier countries that are going to provide some of the support as the countries make the reforms."

He added: "I believe Mario Draghi will do his part, but he's not the sole actor."
As Europe sorts out its governance issues, this could result in less international engagement paving the way for emerging economies to play a bigger part.

"There is a willingness among some of these countries, and some of the leaders to share the role," Mr Zoellick said.

"But it won't happen unless somebody makes it happen. The danger in a time particularly of economic slowdown globally is that it drifts.

"I think under the best of scenarios, Europe will be pre-occupied, it will be struggling with its governance issues, whether it will create a different structure, either more united or of sort of concentric circles. These are questions which I don't think anyone can answer.

"But what it does suggest is that, Europe's international engagement is likely to be less than we've seen in the past. We've already seen Japan's influence shrink, so this creates a very different international environment than what we saw in the past 20 or 30 years."

On China, Mr Zoellick said he expects a soft landing for its economy.

"I think China has the resources to be able to manage this. The question is getting the policy mix."
He said China and its new leaders will be faced with economic and political challenges.
But these could create more investment and growth possibilities for other countries.

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