CANBERRA (Reuters): The World Bank called for national governments to seek long-term debt curbs on Tuesday to solve the current sovereign debt crises in Europe and the United States, but said it was too early for special action by the Group of 20 nations.
World Bank President Robert Zoellick also said it was time to push a free trade agenda, warning against rising protectionism as nations seek to solve their debt crisis.
“This is really at a stage where you still have sovereign governments having to make decisions in Europe,” Zoellick told reporters in the Australian capital Canberra on Tuesday.
“It really is going to be the responsibility of each of those sovereign entities to make the calls on how they are going to face not only the short-term challenges, often assisted by their central banks, but also go to the medium and long term,” he said.
Euro zone policymakers have been battling to contain a debt crisis that threatens to enter a dangerous new phase by engulfing larger nations on the region’s periphery, with the European Central Bank stepping in last week to buy Italian and Spanish bonds in a bid to calm nervous markets.
But the idea of so-called “Eurobonds” or joint euro zone bonds has been fiercely opposed by Berlin, which is fearful such a step would push up German borrowing costs and reduce incentives for weaker euro zone members like Greece to reform their economies.
Zoellick’s comments came as finance ministers of five nations – Canada, Britain, South Africa, Singapore and Australia – wrote a joint article to urge global action to restore confidence and for governments to do more to restore finances.