"Well, I think we're entering a new danger zone, and I think that confidence in economic leadership has been slipping. And it will be important that the primary economic actors take steps, both short and long term, to restore that," said Zoellick in the Australian city where he had gone to address the Asian Society.
Zoellick said such steps in the short term would be primarily dependent on actions such as those from the European Central Bank.
"But over time, it will require attention to some of the fundamentals, and those fundamentals not only deal with sovereign debt and the challenges of basic competitiveness, but they also deal with putting in effective growth strategies," Zoellick said.
He said he could not say precisely how much time Europe has to sort out its problems.
"I think the challenge has been for understandable political reasons the European decision mechanism has continued to muddle along and put together packages that while are significant in their political difficulty have not matched the test of the economic need, and that has, I think, contributed to the weakening of confidence," he said.
He said unless the economic leadership gets ahead of the problem, the lack of confidence "will lead it to spread, and it will spread to players that should otherwise be able to sustain their policies and get beyond the crisis."
He said it will be "very important" for the European economies to get ahead by this fall "as opposed to continually be pulled along."