As the financial crisis continues to devastate economies worldwide, countries and banking institutions seem to be coming more and more isolated as they fight for self-preservation. This is exactly the kind of reaction that World Bank President Robert Zoellick fears will increase the strength and longevity of the crisis.
“A backyard backlash could pull us into an economic spiral,” Zoellick said. “The siren song of protectionism will make this worse.”
This is particularly a concern with Eastern Europe, where national currencies have plunged in recent months due to an over-reliance on exports. Latvia’s government was the first to collapse last week as others teeter on the edge.
Zoellick advocates a coordinated international effort to help sustain those economies which are most vulnerable.
Britain’s Prime Minister Gordon Brown is onboard, calling for backup from the International Monetary Fund: “We are proposing today … a $500 billion IMF fund that enables the IMF not only to deal with crises when they happen but to prevent crises.”