As the leaders of the world's biggest economies prepare to meet in Mexico, the World Bank has warned that the eurozone crisis could have catastrophic effects on the global economy if not properly handled.
Outgoing World Bank president Robert Zoellick has warned that Europe could face what he called "a Lehmans moment" if the eurozone failed to deal properly with its financial crisis.
The bankruptcy of US bank Lehman Brothers in September 2008 triggered a global financial crisis.
Zoellick told the British newspaper The Observer he would tell the G20 summit, which is to be held in Mexico on Monday and Tuesday, that failure to properly handle the crisis could spark a financial meltdown, with terrible consequences for developing countries.
In the interview published on Sunday, Zoellick said developing nations needed to "prepare for the uncertainty coming out of the eurozone and the wider financial markets."
He said this was best done by avoiding short-term debts that sometimes needed to be paid off at inopportune moments, and by focusing on infrastructure and human capital as the pillars of growth.
Quick decision needed
Zoellick also censured what he sees as the dilatoriness of European leaders in remarks made to German news magazine Der Spiegel.
"European politicians always act a day late and promise one euro too little. Then, when it gets tight, they add new liquidity," he said in an interview, also published on Sunday.
Zoellick said this might buy time, but did not tackle the fundamental problems in the eurozone.
"It's no longer so much about which model the Europeans choose. They should just decide on one. Quickly," he said.
Zoellick will be stepping down from his position at the end of June.
His are not the only warnings directed at G20 members preparing to meet in the Mexican resort of Los Cabos.
Angel Gurria, the head of the Organization for Economic Cooperation and Development, said on Saturday that the eurozone's response to its sovereign debt crisis has lacked coordination.
"Europe has the means, the institutions, the vigor and the power ... but its will has not been transmitted in the correct way, because of the problems in the governance of its institutions," Gurria told a news conference in Los Cabos.
He said that if no institutional response to the problems were found, the G20 might need to deploy "overwhelming force" to confront the crisis.
A strong Europe
Mexican President Felipe Calderon, who will be hosting the Group of 20 leaders at the summit, also called on the world's biggest economies to support Europe and keep it strong.
"Even though we don't expect to reach specific agreements on Europe ... I want to see language and promises which are much more oriented to a new, stronger Europe: a Europe of the 21st century," Calderon told international news agencies.
Calderon said his first priority was to finalize G20 members' pledges to bolster the International Monetary Fund's capacity to cope with fallout from the European debt crisis.
In April, G20 countries pledged at least $430 billion (340 billion euros) in new loans to the IMF so it could help countries hardest hit by the crisis. Brazil, China, Russia and Mexico itself have, however, not yet said exactly how much they will contribute.
The G20 summit is being overshadowed by crucial elections in Greece and growing concerns about Spain and Italy. The G20 countries account for around 85 percent of global output and thirds of the world's population.
tj/mz (AFP, Reuters)