ANN ARBOR, Michigan (Reuters) - The head of the World Bank on Wednesday warned there was not a lot of room for error as European leaders scramble to agree on increasing the size of a bailout fund before a key October 23 summit on the region’s debt crisis.
France and Germany have pledged to come up with a convincing plan in time for the Brussels summit on Sunday that would rein in the debt crisis that has been weighing on the world economy.
“I believe this can come together and I believe that since our annual meeting in September, the Europeans have been much more ... focused about this issue, but I also believe there’s not a lot of room for error,” World Bank President Robert Zoellick told reporters after an event at the University of Michigan.
“If the Europeans set some definite steps that don’t stretch too much in the future, markets will react actually well to that,” he added.
Zoellick earlier told several hundred students and professors he was concerned the euro zone crisis would spread to emerging market countries, which are currently driving global growth. He also noted the budgets of poorer nations were still recovering from the 2008-09 global financial crisis.
He said Sunday’s summit as well as the Group of 20 meeting of officials from major economies in France next month were critical to see “whether there are enough actions that match the commitments to deal with some of the market anxieties” over Europe.
Europe faced three immediate challenges, he added, including the recapitalization of its banks, reducing budget deficits in fiscally-strained countries and resolving the sovereign debt crisis in Greece.
Zoellick said the World Bank, together with the European Bank for Reconstruction and Development, were monitoring whether the possible sale of assets by European parent banks to raise capital would impact subsidiaries in developing regions such as Central and Eastern Europe, and the Balkans.
“It is a very fragile environment, so whether it’s for the United States or whether it is for the developing world, the actions that the euro zone needs to take over the course of the next weeks remain vitally important,” he told reporters.