Zoellick Warns Stimulus ‘Sugar High’ Won’t Stem Unemployment

By Timothy R. Homan, Bloomberg:

World Bank President Robert Zoellick warned policy makers that fiscal-stimulus plans are insufficient to turn around the “real economy” and rising joblessness threatens to set off political unrest across the globe.

“While the stimulus has given an impulse, it’s like a sugar high unless you eventually get the credit system working,” Zoellick said in an interview yesterday with Bloomberg Television’s “Political Capital with Al Hunt.” “When unemployment increases, that’s probably the most political combustible issue.”

Zoellick’s caution is a contrast with private economists, who are raising their outlooks for growth from India to China as stimulus measures take effect. The biggest developed and emerging nations have committed spending increases and tax cuts totaling 2 percent of their combined economies, a level the International Monetary Fund recommended to end the recession.

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