Addressing business leaders on the eve of the G20 summit in Mexico, Robert Zoellick and other senior international economists said that Europe needed to improve its institutional response in order to reassure bond markets.
"Look everyone knows this meeting is coming at an absolutely critical time -- and we're waiting for Europe to tell us what it is going to do," he said at a panel in the B20 business summit, held in parallel to the G20 meet.
"Markets can manage risks that they're well aware of. The danger we're creating is that the pattern of policy-making is increasing uncertainty and making markets more nervous, which has a negative feedback," he said.
"To take your Spanish example.... The execution was extremely poor," he said, arguing that markets were confused between the roles played by the eurozone's various stability mechanisms, bail-out funds and central bank.
"So they took a very big bullet and they wasted it," Zoellick said.
Eurozone powers agreed last week to provide a bail-out loan of up to USD 125 billion to salvage Spain's stricken banks, but the deal failed to stop an intensifying storm on the debt market.