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World Bank boss: Emerging markets at risk

January 26, 2012 -- Updated 1842 GMT (0242 HKT)
  • World Bank president Robert Zoellick warns the euro crisis has put emerging markets at risk
  • Markets closest to Europe will be most at risk, he says
  • He sees the future of the eurozone as resting on Spain and Italy

(CNN) -- World Bank President Robert Zoellick has warned that the eurozone crisis could have a dire effect on emerging markets if it continues in 2012.

Speaking to CNN's John Defterios at the World Economic Forum in Davos, Zoellick discussed the World Bank's assessment that the coming year could be as bad for emerging markets as 2008 if the eurozone crisis worsened.

"If there's a more serious breakdown in the eurozone... then developing countries have to be prepared," he said. "They have to pre-fund some of their own bonds, they have to look at the trade side, they have to look at the banking side."

He said that while developing countries had provided about two-thirds of growth globally over the past five years, "we're all in this boat together and so if Europe really stumbles and fails it's going to hurt everybody."

The World Bank is trying to shield emerging markets by making $27 billion available over next two years, specifically in central and eastern Europe.

While each emerging market would weather the crisis differently, he said, "the closer you are to Europe, the more you're going to be at risk."

He said the issues underlying Europe's crisis were yet be resolved. "Europe has sort of stumbled up to each crisis, put together a package, managed to get through the crisis, and it's bought time but it hasn't fundamentally addressed the problem."

Solving the crisis now required "paying attention to the politics of reform, not just the economics of the balance sheet. My belief is Germany and others need to hold out some carrots if these countries sustain the political support," he said.

"It's really now in my view a question of Italy and Spain. Greece and Portugal and others, they're going to cause waves and issues but they're much smaller pieces of the problem."

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