Charlie Rose Talks to Robert Zoellick
You recently said, “European politicians always act a day late and promise one euro too little.” Will that finally change at some point?
The challenge is still whether they can get ahead of the process. There are really two core issues. One is to ensure a strong banking system, and much of that effort in recent weeks has been focused on Spain. If they get sufficient capital in the banking system, that will give additional freedom for the European Central Bank to put money into banks and deal with the risks of uncertainty that could lead to contagion. The second issue is that Spain and Italy have been undertaking some difficult reforms to get control of their budgets—but also structural reforms such as pension and labor market systems. These will take time to show the benefits. And in the meantime, the borrowing costs, particularly of Spain, have been increasing. So Europe needs to come up with some way to ensure that they can continue to roll over their bonds and get financing as the reforms take hold.
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