Zoellick says German caution raises euro-zone risk
By Howard Schneider,
Germany has been too cautious about putting its wealth behind the euro zone, World Bank President Robert Zoellick said Wednesday, warning that Berlin’s reluctance is raising the risk that the region’s financial problems will escalate into a wider crisis.
Zoellick has consistently criticized European leaders as a group for failing to fix the problems in the 17-member currency union. But on the eve of his departure this week as head of the World Bank, he singled out Germany for criticism and said he worries that support for European integration is eroding in a country essential to the euro’s success.
“I take the German leaders at their word. I think they are sincere that their object is not to let [the euro] fail,” Zoellick said. But “the biggest risk is of miscalculation. So as Germany deals with the problem incrementally or plays brinksmanship or negotiates . . . that the snowball starts getting so big going down the hill that you can’t stop it.
“The Germans have been too cautious. . . . They need to show they would be willing to provide assurances that Spain and Italy can fund themselves at reasonable rates,” Zoellick said. He said efforts to stabilize the euro zone have proven “ephemeral.”
Zoellick took over the World Bank five years ago as the agency was reeling from the departure of former president Paul Wolfowitz amid a controversy over his romantic relationship with a World Bank staffer. Soon after, Zoellick had to craft the bank’s response to the world financial meltdown, which pushed the agency into less familiar territory, such as helping backstop European economies at risk of being pulled down by problems emanating from the United States.
In a wide-ranging interview, Zoellick, 58, drew what he considered a stark contrast between the “pragmatism” he found among leaders of developing nations like China and Brazil, and the gridlock in Europe and the United States over both major and minor issues.
In the United States “there was a missed opportunity” when leaders failed to act on the far-reaching recommendations of a bipartisan committee set up by President Obama to address the country’s debt problems. He blamed Obama for the lack of action.
“It won’t happen unless the president of the United States does it,” said Zoellick, a ranking trade and foreign policy official under Republican presidents and considered a possible member of a Romney administration. “The U.S. missed a moment, and if we had done something then, frankly we would have more standing internationally to help with Europe now. To be a key player we have get our own foundation in place.”
He also noted how smaller-bore policies that have been quickly taken up in developing countries — from job training strategies to devising programs for private money to build public infrastructure — have not found favor in richer nations.
“What I find around the world is a huge interest in education, training, work-force development. . . . In this country it is all locked down to student loans and who is ripping things off as opposed to let’s see what models work,” Zoellick said. “The developing world is more pragmatic about using what works. . . . That does not mean they have it all right. They have their own challenges.”
Zoellick will be succeeded next week by former Dartmouth University president Jim Yong Kim.
The World Bank announced Wednesday that Zoellick had accepted positions as a senior fellow at the Belfer Center for Science and International Affairs at Harvard University, and as a visiting fellow at the D.C.-based Peterson Institute for International Economics.
He said he hopes to write and research the links between economics and global security problems, and advise lawmakers on the country’s longer-term budget problems.