Washington, DC–(ENEWSPF)–April 19, 2012.
MR.QUEST: Mr. President, thank you.
MR. ZOELLICK: Glad to be with you.
MR.QUEST: The situation if not grave is serious. And yes, we have been in worse situations over the last two or three years, and no doubt you’ll say that this is no time for complacency. What needs to be done?
MR. ZOELLICK: Well, it’s no time for complacency. Well, I think there are a number of aspects. Right now, people are focused on the problems in the euro zone. The European Central Bank’s efforts bought time, but people have to use the time. And there continues to be a combination of issues with the banks, the sovereign debt, the fiscal consolidation. And my emphasis is that doing all of this in an environment without growth is very difficult.
MR.QUEST: Are you now saying that the balance at the moment between austerity and growth in the euro zone is wrong?
MR. ZOELLICK: No, I don’t–this simple tradeoff of zero-sum does not work for me. So what I believe is that the Germans, for example, are right about countries having to take the fundamental steps in terms of fiscal consolidation and structural reform for growth. My point, however, is that if you don’t have some additional demand, it is hard. I have tried to come up with some ideas on the supply side with additional investment and additional use of the single market for services and people that would help with the politics of reform.
MR.QUEST: But at the end of the day, when you look at the unemployment numbers in euro and in the euro zone, they are nothing short of a disgrace at the moment?
MR. ZOELLICK: Well, you can use your terms. I don’t find it too helpful to just say–to use language like that. I think we have got to get out of the problem. And I think that we are still in a period of drift, and I think other actions are going to need to be called for, and they are both some of the fundamentals that the Germans have called for, but they are also some of the pro-growth steps that I and others have been suggesting.
MR.QUEST: So, as we take Spain as an example, do we have an opportunity here for Europe to get Spain right–having singularly managed to avoid getting it right on the other countries until bailouts became necessary, now they do have a chance to get ahead of the curve here?
MR. ZOELLICK: Well, let’s start with the basics.
The future of Spain depends on the Spanish, so the most important thing about getting Spain right is for the Spanish. But if you are going to keep a euro zone, and you are going to have an effective European Union, they certainly need support; and as somebody who has had some experience with politics as well as economics, what I am suggesting is that as they make these tough economic decisions, as they have 23 percent unemployment, they are going to need some support to continue the process.
But also, let’s not just get totally absorbed with Europe. I represent the World Bank and developing countries. Developing countries represent two-thirds of global growth. So one way you help Spain and Europe is to continue to foster the growth in developing countries because that will create some markets for Spain and others.
MR.QUEST: Let’s talk of them–we’ll skate to the developing countries at the moment. There are maybe not as critical issues, but the wash of the European problems can seriously hamper the developing countries not only for their growth but also for their elimination of poverty.
MR. ZOELLICK: Yes. Well, the big deleveraging that you have seen of European banks, which is partly the need for them to restore their capital levels, is understandable. I wish they could build some capital as opposed to shrink. In places like Asia, it has been substituted with Asian banks, but for example, in Central and Eastern Europe, we launched–the World Bank launched–an initiative with the EBRD, the European Bank for Reconstruction and Development, the EIB, the Investment Bank, EC, to try to make sure that the process of credit contract is at least orderly. North Africa is an effect, and I am particularly concerned about things like trade finance in
MR.QUEST: Argentina’s decision to expropriate Repsol’s Argentinean assets has caused a furor, as you might expect, between Argentina, Spain, the companies involved, and you must be concerned that this gets out-of-hand, because one of your own areas that the World Bank has looked at before is claims on these sorts of questions.
MR. ZOELLICK: Well, I think it’s a mistake, and I think it is somewhat symptomatic of the dangers that we are going to see in many countries about pressure for populism, nationalism, autarchic policies, protectionism. It is not going to be good for Argentina over the long run, but you are right–it is the sort of thing that you want to resist on all accounts.
MR.QUEST: Argentina has more than 40 claims before the tribunal from previous occasions of this sort of activity. What would you recommend or suggest needs to be done on this occasion?
MR. ZOELLICK: Well, if you are talking about one of the investment tribunals, since it is part of the Bank, I actually–to have it be a fair process, I am not commenting on the tribunal cases. But I think I have made quite clear that I think the step that Argentina took, in the words of President Calderon of Mexico, what investor in his right mind would put money into a country where people are taking away the private property?
MR.QUEST: Isn’t the difficulty now how to avoid what has taken place, with Argentina not losing face, with Spain getting back what it believes is its right, with the companies involved getting proper compensation–finding a formula that allows everybody to roll back is what is going to be challenging.
MR. ZOELLICK: I suppose. My view of life is if you make a mistake, you should reverse it.
MR.QUEST: You just think they should change their minds?
MR. ZOELLICK: I think it was a bad policy. I think it’s a mistake, and I think it will hurt Argentina over the long run. It may have some short-term political benefit to the government, but this is not the time to be playing with fire, and ultimately, it will leave Argentina behind in the international economy, and that hurts the people of Argentina, and that is who I am concerned about.
MR.QUEST: As you come to the end of your tenure here and the World Bank looks to a new direction or a change, how would you best describe what you think the change will be in the new administration?
MR. ZOELLICK: Well, I think there will obviously be some continuation. What I have tried to do differently is to focus on the clients. So, sometimes you have a lead economist say the Bank should do X or Y or Z. My view is let’s listen to the client, and then let’s try to get faster, more flexible, and modernize our operations. This moves in the direction of making it a more open institution. We have had a lot of transformation of information, data policies, research policies, to partly democratize the development process.
From the contacts I have had with Dr. Kim, I think he will do a fine job, and I think his science, evidentiary-based model will move in that direction.
I am pleased that I have tried to leave a well-resourced institution. We had the first capital increase in some 20 years, and we raised about $90 billion for our fund for the poorest, so that’s a pretty good start. But yes, I believe in change, and that is one reason why I stepped down. I think it is good to bring somebody else in and have fresh ideas. So let’s see what he decides.
MR.QUEST: Finally, ten years from now–because let’s face it–the time that you have been here at the Bank, so much time has been taken up with crises, whether it is food—
MR. ZOELLICK: Yes. We did about a quarter-trillion dollars of support.
MR.QUEST: –right–and the financial crisis–ten years from now, will we be out of the financial crisis? Will things look a lot better, do you think?
MR. ZOELLICK: I certainly hope so. I am an optimist. But I am also a person who has made policy, and it depends on the decisions that people make, so those are some of the things that I hope to push forward even in my last Spring Meetings.
MR.QUEST: Thank you very much indeed.
MR. ZOELLICK: My pleasure.