World Bank chief warns of ‘new danger zone’
Monday August 15 2011 | 07:55 AM

World Bank president Robert Zoellick has claimed the world is "entering a new danger zone" and suggested that recent political deals in the EU have not yet gone far enough to stem the bloc's economic crisis.

Zoellick, speaking in Sydney on Sunday, chastised the governments of the world's largest powers as he claimed that confidence is lacking in their ability to make tough decisions.

"I think that confidence in economic leadership has been slipping and it will be important that the primary economic actors take steps, both short and long term, to restore that," the American said.

"This autumn it'll be very important for the European economies to get ahead of the problem as opposed to continually be[ing] pulled along."

The president's comments come less than a month after eurozone leaders agreed a new €109bn ($155bn) bailout of Greece which also saw a strengthening in the powers of the European Financial Stability Facility.

At the emergency one-day July summit in Brussels, European Commission president José Manuel Barroso claimed it was the "first time since the beginning of the crisis" that politics and the markets had come together. 

However, amid renewed panic in international stock markets earlier this month, Barroso warned that EU governments were dragging their feet over implementation of the package.

In his remarks on the sidelines of the Asia Society annual dinner in Sydney, Zoellick called on leaders to address some of the "fundamental issues" at stake beyond sovereign debt, including boosting growth and competitiveness.

The president said that in the short term action in Europe will "primarily be dependent" on the European Central Bank.

He also called on governments - in particular in Asia Pacific - to challenge attempts at protectionism. "The best defence against protectionism is to be on offense by opening markets," he said.

"Over time, it will require attention to some of the fundamentals, and those fundamentals not only deal with sovereign debt and the challenges of basic competitiveness, but they also deal with putting in effective growth strategies."