Zoellick on Greece, Eurozone, Food Inflation
Greece’s Prime Minster George Papandreou will face a vote of confidence in parliament tonight at midnight Athens time, 5PM ET. The government is working around the clock to gather support for its economic reforms and a new set of austerity measures.
We will cover this throughout Closing Bell today.
World Bank President Robert Zoellick told Maria Bartiromo that the bank has not lent money to Greece in over 30 years. Zoellick said it’s more of an issue for the IMF and European finance ministers.
Looking within the Eurozone, Zoellick thinks the economic growth today is “pretty slow.”
Here’s the transcript of Maria Bartiromo’s interview with Robert Zoellick.
BARTIROMO: Putting the Greek issue aside, of course, I understand that the IMF and the EU is dealing with that, what can you tell us about the Eurozone in terms of economic growth today? How do you see things?
ZOELLICK: I think it's pretty slow. And this is partly because the population levels are slower, so there, you don't normally see the same growth levels in the EU that you'd see in North America. But I think the worry is as the countries muddle through, basically providing liquidity to some of the peripheral countries, whether they'll undertake some of the structural changes and get at some of the fundamental issues so that Europe can return as a serious pool of growth. Because we're in the odd situation now, you're relying primarily on the emerging markets. It'd be great if the United States and Europe were also coming back to stronger growth.
BARTIROMO: Talk to us about the global economy today. So many questions as far as the growth of the rest of the world vs. the United States, and how the US fits into that new global shift of power. What are your main concerns when looking at the global economy?
ZOELLICK: Well, this recovery has really been one that has been multispeed. In the emerging markets, which we deal with, the real issue now is they've recovered quite nicely, and it's how to avoid inflation and asset price bubbles. The developed markets have obviously been stumbling along, so in the United States it's slow growth, unemployment, the issues on the financial and fiscal side and the deficit. And in the Eurozone it's how they'll be able to not only manage that crisis, but to return to better growth.
BARTIROMO: Even in the emerging markets, though, aren't we seeing a bit of a slowdown there? Or course, relatively speaking, we're still talking about very significant growth rates relative to the West. But are you also seeing slowdowns, for example, in China?
ZOELLICK: China does seem to be slowing a little bit. But I think it's actually appropriate. I mean, they actually recovered very, very well. And with the risk of overheating, it's actually important that they come back down a little bit so as to avoid having a different type of bubble situation with some of the assets, whether it be in real estate or other sectors.
BARTIROMO: We're also seeing in some cases perhaps asset bubbles in places like Brazil, where you are seeing growth rates certainly strong relative to the rest of the world, but a whole new set of issues.
ZOELLICK: Yes, that's the nature of the new international economy we're in. People are going to be moving at different speeds, going to be different issues. I think the important part is that the emerging markets now represent about a half of global growth, so at a time that the developed countries have been struggling, those markets have been assuming more prominence, whether it be in commodities markets, some of the issues that we deal with on food side, but also, to help with some of the exports from developed markets.
BARTIROMO: Let me ask you about the issues that you're dealing with on the food side. Of course, we've seen such demand and a food shortage. Where are we on that front when looking at the world today?
ZOELLICK: Food prices are about 50 percent higher than they were a year ago. They've come down a little bit or stabilized over this quarter. But the risk is that the stocks for most of the grains, particularly wheat and corn, are very, very low, at least by historic terms. That means if you get some weather shock or other event, you could have an increase in price spikes again. That's a reason that this G-20 ag (agriculture) ministers meeting that I'll be attending in France is trying to focus on how to deal with the most vulnerable countries and people to try to recognize volatility will be part of the future, but how do we try to create some insurance for those that are in the weakest position?
BARTIROMO: Who is getting hurt the most from the spike that we've seen in prices?
ZOELLICK: It's always the most vulnerable. It's the people that are either low income, countries some of the Middle Eastern countries that have been big wheat importers. Rice market has been a little bit better than wheat and corn or maize. And so this is why, at a minimum, you need to try to limit policies that exacerbate a problem. For example, these export bans that just add to a sense of crisis. And one of the things we've been pushing at this upcoming meeting is to, at a minimum, have an exemption for some of the humanitarian purchasers, such as the World Food Program.
BARTIROMO: I was saying that the World Bank, of course, talking about the new risk management product to provide up to initial $4 billion in protection from this volatility in food prices, talk to us about that.
ZOELLICK: This is something that probably most of your listeners are very used to in developed markets, but in developing markets people really don't have access to some of the basic commodity derivatives. So these are pretty plain vanilla product, but we've launched a pilot with JPMorgan because we could see that some of the producers had a hard time insuring themselves against some of the price declines, and then some of the consumers or users had a hard time using some of the basic protections against price spikes. So what they've encountered is they have high upfront costs, they have high margin costs. So we and JPMorgan are providing some addition credit support. We'll try to help these--some of these players be able to access these commodities markets. And I think this'll take off pretty quick. We're talking to banks in Europe as well so we can try to make sure that derivatives, which have gotten a bad name in some quarters, can be used to try to insure some of these players.
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