Rising unemployment raises threat of social crisis: World Bank

Sun May 24, 2009 7:27am EDT

MADRID (Reuters) - World economic recovery will be slow and rising unemployment could bring the threat of social crisis and protectionism, World Bank President Robert Zoellick said in an interview with Spanish Sunday newspaper El Pais.

"What began as a great financial crisis and became a great economic crisis is now becoming a great crisis of unemployment, and if we don't take measures there is a risk of a great human and social crisis, with major political implications," he said.

"That's a good breeding ground for populist, protectionist policies," he added.

"The finance ministers of the G7 and the G20 are displaying a certain relief because the contraction has slowed. Although we could still have low or negative growth, the situation is less bad," he said.

"But economists and industrialists are conscious that the recovery will be slow coming and weaker than expected."

Dangers remain in the U.S. financial system and in vulnerable emerging markets, Zoellick said.

"Maybe the key thing that has to be cleaned up is the financial system. The USA has taken steps in the right direction, but there are still banks with serious difficulties related to consumer finance, credit cards and real estate.

"On top of that, the United States depends more than Europe on the mortgage securitization market, and that market has yet to recover," he said.

He said there were risks in Africa, parts of Latin America and in Eastern Europe.

"China could surprise on the upside, it has obtained good results from its stimulus plan. For countries like Mexico and Brazil, the main threat is losing access to finance," Zoellick said.

(Reporting by Jason Webb; editing by Andrew Roche)

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