BERLIN (Dow Jones)--The euro rescue package agreed to in May in Europe is only a first step, World Bank President Robert Zoellick said Wednesday, adding that it's important to learn to right lessons from the crisis and that a managed debt restructuring could be an option for countries unable to repay their debt. Restructuring of debt of a euro-zone country defaulting could be an issue, even though some fear that could cause contagion that would make it more difficult for other countries to roll over debt.
"These are serious concerns. Yet investors' lack of confidence in debtors could lead them to back away for good, leaving more and more of the debts to be assumed by other European governments or the ECB [European Central Bank]," Zoellick said.
The uncertainty about who will pay and how they will pay can exacerbate and spread fears--sweeping along other countries, or banks, that would otherwise be able to manage given discipline and time. "One needs to consider these issues carefully, case-by-case," Zoellick suggested.
"If it becomes clear that a particular debtor cannot pay back its borrowings, a managed restructuring, combined with financial support, can create confidence that growth can be restored." He welcomed the European Union's announcement of a EUR750 billion bailout package jointly with the International Monetary Fund for euro-zone states on the verge of a default.
"The financial package approved by the European Union in May was vital," said Zoellick, who received a Ludwig-Erhard-Medal from the Christian Democratic Union's economic council. "But this response buys only time."
Last month, the European Union announced a EUR750 billion bailout package jointly with the International Monetary Fund for euro-zone states on the verge of a default.
He stressed that it is crucial that the diagnosis of the euro zone's debt crisis must be right because otherwise the euro zone risks opting for the wrong treatment of the debt crisis.
He also said Europe must foster economic growth as well as opt for fiscal consolidation.
Chancellor Angela Merkel's austerity plan presented Monday shows that Germany is acting both for home and Europe, Zoellick said.
Still, he said, "Fiscal consolidation is necessary, but it's not enough."
The comments highlight the deep disagreement over fiscal policy between Germany and the U.S., but also with some other European countries, such as France.
Earlier this week, Germany implemented over EUR80 billion in austerity measures for the next four years which are aimed at reducing the government's soaring budget deficit. Some countries, including the U.S., have warned Germany against weakening its domestic demand by focusing prematurely on reducing deficits.
i like how he called the countries "states"
"These are serious concerns. Yet investors' lack of confidence in debtors could lead them to back away for good, leaving more and more of the debts to be assumed by other European governments or the ECB [European Central Bank]," Zoellick said.
The uncertainty about who will pay and how they will pay can exacerbate and spread fears--sweeping along other countries, or banks, that would otherwise be able to manage given discipline and time. "One needs to consider these issues carefully, case-by-case," Zoellick suggested.
"If it becomes clear that a particular debtor cannot pay back its borrowings, a managed restructuring, combined with financial support, can create confidence that growth can be restored." He welcomed the European Union's announcement of a EUR750 billion bailout package jointly with the International Monetary Fund for euro-zone states on the verge of a default.
"The financial package approved by the European Union in May was vital," said Zoellick, who received a Ludwig-Erhard-Medal from the Christian Democratic Union's economic council. "But this response buys only time."
Last month, the European Union announced a EUR750 billion bailout package jointly with the International Monetary Fund for euro-zone states on the verge of a default.
He stressed that it is crucial that the diagnosis of the euro zone's debt crisis must be right because otherwise the euro zone risks opting for the wrong treatment of the debt crisis.
He also said Europe must foster economic growth as well as opt for fiscal consolidation.
Chancellor Angela Merkel's austerity plan presented Monday shows that Germany is acting both for home and Europe, Zoellick said.
Still, he said, "Fiscal consolidation is necessary, but it's not enough."
The comments highlight the deep disagreement over fiscal policy between Germany and the U.S., but also with some other European countries, such as France.
Earlier this week, Germany implemented over EUR80 billion in austerity measures for the next four years which are aimed at reducing the government's soaring budget deficit. Some countries, including the U.S., have warned Germany against weakening its domestic demand by focusing prematurely on reducing deficits.
i like how he called the countries "states"
those who can, do. those who cant, talk about those who can
