World in new economic dangerzone, warns Zoellick

THE head of the World Bank says the world has entered a new economic dangerzone and that Europe, Japan and the US all need to make hard decisions to avoid dragging down the global economy.

“Unless Europe, Japan, and the United States can also face up to responsibilities. they will drag down not only themselves but the global economy,” World Bank president Robert Zoellick said.

“They have procrastinated for too long on taking the difficult decisions, narrowing what choices are now left to a painful few.”

The World Bank and IMF will meet in Washington next week for talks that will focus on Europe’s debt crisis and the risk of a Greek default.

Mixed signals from European leaders have escalated fears the 17-nation eurozone may be unable to unite behind a common approach to tackle the crisis.

Zoellick said European countries were resisting difficult truths about their common responsibilities, Japan had held off on needed economic and social reforms, and political differences in the US were overshadowing efforts to cut record budget deficits.

Those countries need to act responsibly to get a handle on their own economic problems, Zoellick said.

“The time for muddling through is over,” he said.

“If we do not get ahead of events; if we do not adapt to change; if we do not rise above short-term political tactics or recognise that with power comes responsibility, then we will drift in dangerous currents.”

The World Bank chief said emerging market nations would not sit on the sidelines as advanced economies try to right themselves.

“The story then won’t be about tectonic shifts that have made emerging markets the new engines of the global economy,” he said. “It will be about tectonic shifts that have left developed countries slamming on the brakes.”

Zoellick said developed countries had yet to fully recognise the global shifts and still operated under a “do what I say, not what I do” policy.