At the Cato Institute’s 29th Annual Monetary Conference (IV)


Robert Zoellick
President, World Bank

Questions from:

Sebastian Mallaby
Senior Fellow, Council on Foreign Relations

Asked about the EU crisis:

Missed his first point.

2) Greek debt forgiveness may come.  3) EFSF assist Italy and Spain with rollover.  4) Markets judging governments.  Slow motion run. 5) move toward political and maybe fiscal union.

All liquidity and buying time.  Emerging markets in the G20 look at the EU, and are surprised at the lack of coherence.  Zoellick doesn’t want to see the US get there.

What can Germany do?

Germany’s policies individually are reasonable, but not in aggregate. 2,3) Could provide even more in aggregate to the EFSF or IMF SDRs –> Germany: other Europeans should become more like Germany.

US underestimates Germany’s commitment to the Eurozone.  Merkel building commitment among the German electorate (?!)

What political/fiscal reforms could take place?  Uncertain.

Germany: Markets should not dominate the State (DM: Hegel?), unlike US & UK.

What else can be done?

Italy might be fixable, with a little bit of time.  Spain also.

Isn’t this just a question that reserve assets now appear to be risk assets?

Get countries to recognize the externalities inherent in their policy choices.  Get the emerging markets to move toward flexible exchange rates and independent central banks.

US Dollar will remain the main reserve currency, but may go multipolar to many reserve currencies.

Gold will judge the policies of Central Bankers.  At least Central Banks should look over their shoulder at it.


Corruption? Why not exclude those nations the Eurozone that can’t stand the rigor?

US less transparent than the World Bank.

Question comes down to cross-subsidy of the less rigorous.