World Bank chief says markets are in a danger zone

Japan Herald Monday 15th August, 2011

Speaking at the annual dinner for the Asia Society in Sydney, World Bank chief Robert Zoellick warned that the markets were in a new danger zone.

Zoellick, president of the World Bank, said that investors had lost confidence in the economic leadership of key countries, notably the US and members of the EU.

“What’s happened in the past couple of weeks is there is a convergence of some events in Europe and the United States that has led many market participants to lose confidence in the economic leadership of some of the key countries,” Zoellick said.

His comments come just days after the US had its credit rating cut from AAA to A+ by Standard and Poor’s. The credit rating agency singled out the inability of Congressional leaders to work together as a factor in their decision to downgrade US debt.

The US Congress fought a bitter and divisive battle to come to an agreement on raising the national debt ceiling, eventually reaching a compromise just one day before a possible default.

In Europe, a recent rumour that France would have its debt downgraded caused a plunge in world markets, although that rumour was later dismissed by leading credit rating agencies, while fears over EU debt generally have added to the uncertainty plaguing the market.

“I think those events combined with some of the other fragilities in the nature of recovery have pushed us into a new danger zone,” said Zoellick, adding that he wanted world leaders to take note and that national lawmakers should show more leadership.