World Bank president Robert Zoellick warns that a new recession is likely if world leaders don’t act fast.
Unless the economic leadership gets ahead of the problem in its different dimensions, you’ll see the lack of confidence…spread.
We are entering a “new danger zone”, he said. What we need is cooperation. This sentiment is echoed in an op-ed coauthored by the finance ministers of England, Singapore, Canada, South Africa and Australia in the FT today. They write:
The more serious malaise today is the lack of confidence in efforts by governments to address the structural problems that underpin weak growth, high unemployment and unsustainable fiscal balance sheets. Global co-ordination in the recovery is inevitably harder than co-ordinated reflation at the peak of the crisis because the necessary reforms are more difficult to achieve and sustain. But the biggest barriers are political, not economic, so what is needed is political leadership and courage.Banking systems must be strengthened and financial regulation co-ordinated at a global level. Structural reforms to improve economic performance in developed economies must be accompanied by progress on global trade negotiations. Getting public finances back on to a sustainable trajectory is central. Nobody should underestimate the political difficulties inherent in the task, but it first requires a collective sense of reality.
The odds are uncomfortably high that cooperation won’t come. When times are good, it’s easy for countries to cooperate. When times are bad, cooperation is more important to have — and harder to get. Leaders around the world are preoccupied with domestic problems — riots in the UK and China, US downgrade and unemployment, the EU crisis, Indian inflation — and don’t have much room to maneuver.At Via Meadia, our confidence in world leaders is not high — not because the current crop is all that much worse than the normal mediocre mix but because the problems are so unusually tough. Fingers crossed, hatches battened, we are watching the storm.