“Monetary policy fundamentally buys time,” Zoellick told CNBC on Monday. “It doesn’t deal with the fundamentals.”
What is most critical right now, insisted Zoellick, is that debt-laden nations like Spain and Italy implement fiscal and structural reforms. “The Germans are right, they (Spain and Italy) have to fix their fiscal situation, but also structural reforms for competitiveness.”
He added that eurozone nations need to ensure that Spain and Italy have access to funding as they carry out their reforms. Spanish and Italian banks must be recapitalized.
As far as the role of the United States in the debt crisis, Zoellick said that if the U.S. can successfully rein in its budget deficit, that would be a big boost in confidence for global markets.