SYDNEY – The global economy was entering a “new and more dangerous” phase because of the debt crisis in Europe, World Bank chief Robert Zoellick warned Saturday.
Zoellick, speaking in an interview with the Australian newspaper, said Europe’s sovereign debt concerns are much more serious than those that saw a credit rating downgrade in the United States.
“We’re in the early moments of a new and different storm – it’s not the same as 2008,” Zoellick said.
“In the past couple of weeks the world has moved from a troubled multispeed recovery – with emerging markets and a few economies like Australia having good growth and developed markets struggling – to a new and more dangerous phase.”
Zoellick said interest rates are at historical lows in the developed world, which means central banks have no further room to move on monetary policy.
Governments have also gone into debt to fund stimulus measures and would have to borrow to finance further stimulus measures.
“Most developed countries have used up their fiscal space and monetary policy is about as loose as it can be,” he said.
Zoellick said European Union action has fallen short of what was required.
“The lesson of 2008 is that the later you act, the more you have to do,” he said.
The former U.S. diplomat urged British Prime Minister David Cameron to stick with the austerity measures he promised. “My concern would be if the politics knocked them off course,” he said.