World Bank’s Zoellick Says Sovereign Debt Crisis Threatens Euro

Sovereign-debt difficulties in Europe pose a threat to the euro and financial institutions in the region, said World Bank President Robert Zoellick.

“The world economy is entering a new danger zone this autumn,” Zoellick said in remarks prepared for a speech in Beijing today. “The financial crisis in Europe has become a sovereign debt crisis, with serious implications for the Monetary Union, banks and competitiveness of some countries.”

European sovereign default risk rose to a record yesterday after a report showed employment in the U.S. unexpectedly stagnated in August, adding to signs the global economic recovery is weakening. Stocks sank in August, sending the MSCI All-Country World Index down 7.5 percent for the biggest loss since May 2010.

“Decisions in Europe, decisions in the United States, decisions in China -- they affect all of us,” said Zoellick, who also spoke about China’s place in the world economy. “China’s structural challenges occur in a current international context of slowing growth and weakening confidence.”

In July, the World Bank labeled China, the world’s second- largest economy, an “upper middle income” country, alongside countries like Brazil and Turkey. “In the next 15 to 20 years, China is well-positioned to join the ranks of the world’s high- income countries,” Zoellick said.

The high-income echelon consists of countries such as Japan, Germany and the U.S., according to World Bank classifications.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net.