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Zoellick Says Europe Crisis Raises Odds of Recession in U.S.

Sept. 20 (Bloomberg) -- The odds of another recession in the U.S. have increased as European Union nations struggle to tame the region’s sovereign debt crisis, World Bank President Robert Zoellick said.

“We’re getting closer to the risks of double dip,” Zoellick said today on Bloomberg Television’s “InBusiness” with Margaret Brennan. “I still wouldn’t predict it, but it really depends on how the risks coming out of Europe are managed.”

A stagnant U.S. labor market and declining consumer confidence, alongside growing doubt that European policy makers will be able to prevent a Greek default, have raised the risk the world’s largest economy might contract, Zoellick said.

He spoke after the International Monetary Fund lowered its forecast for U.S. growth. The world’s largest economy will expand 1.5 percent this year, down from the 2.5 percent projected in June, the IMF said today in its World Economic Outlook report. Unemployment will average 9 percent or higher through next year, it said.

There is a danger fallout from Europe and the U.S. could damp confidence, demand and investment in developing countries, which have helped drive the global recovery, Zoellick said. That may prompt them to erect barriers to trade, he said.

“In an environment like this, you have to watch out for all types of protectionism,” Zoellick said. “You’ve seen in recent weeks some increased barriers in the machinery sector coming out of Brazil, and with the turmoil there will be more political pressure for this.”

To contact the reporters on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net; Margaret Brennan in New York at mbrennan25@bloomberg.net

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

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