As markets eagerly await a decision from the European Central Bank (ECB), which holds its policy meeting on Thursday, Robert Zoellick, former president of the World Bank, warned that monetary easing will do little to solve the region’s debt crisis.
“Monetary policy fundamentally buys time. It doesn't deal with the fundamentals,” Zoellick told CNBC in Singapore on Monday.
Following ECB President Mario Draghi’s pledge last week to do “ whatever it takes ” to protect the euro zone from collapse, there were news reports on Friday that he was discussing a rate cut and new liquidity program, among other measures.
Zoellick, however, said what is most critical right now is that debt-laden nations like Spain and Italy implement fiscal and structural reforms.
“They have to make reforms. The Germans are right, they (Spain and Italy) have to fix their fiscal situation, but also structural reforms for competitiveness,” he said.
He added that euro zone nations need to ensure that Spain and Italy have access to funding as they carry out their reforms — through measures such as the European Stability Mechanism or euro bonds .
“The most difficult issue is (avoiding a) mismatch between the time that the reforms will take effect and their financing,” he said.Page 1 of 2 | Next Page